The payments on a mortgage are calculated to provide a level payment that completely pays off the loan when the last payment is made. Each payment is allocated to interest to the lender and a reduction of the loan principal. The interest paid on each payment is based on the outstanding loan balance. Reducing the loan balance with extra principal payments reduces the total interest paid and the time it takes to pay off the mortgage.
The amount of money saved by making additional mortgage payments is determined by the interest rate of the mortgage and the size of the loan. A mortgage calculator with an amortization function and the option to include extra principal payments will calculate the savings based on your mortgage rate and principal amount. Mortgage calculators
can be found online, or you can use a mortgage template for a spreadsheet program like Microsoft Excel. Links to specific calculators are provided in the Resources.
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