Mortgage Repayment Calculator: Smart guide to your monthly payments and extra repayments
November 20, 2024
Mortgage Repayment Calculator: Smart guide to your monthly payments and extra repayments
Taking out a mortgage is one of the biggest financial decisions in your life. With a mortgage repayment calculator, you can gain insight into your monthly costs and discover how much you save if you make extra repayments. Below, we explain how monthly payments are structured, what mortgage types exist, and when making extra repayments might be beneficial.
Why is a mortgage repayment calculator useful?
Once you take out a mortgage, you pay interest every month and repay a portion of the loan. A good calculator makes these costs clear and helps you decide if extra repayments fit your situation. The calculator considers factors like your principal, interest rate, term, and mortgage type. With an annuity mortgage, you mainly pay interest at the beginning and repay more later. With a linear mortgage, the amount you repay is the same every month, causing your monthly payments to decrease over the term.
How are the monthly payments structured?
The monthly payments for a mortgage usually consist of three parts:
- Interest and repayment (gross monthly payments) – This is the amount you pay the bank for the borrowed money and the repayment of the debt. The amount depends on your mortgage amount, interest rate, term, and mortgage type.
- Tax benefit (net monthly payments) – The mortgage interest is often tax-deductible. After deducting this tax benefit, your net monthly payment is lower.
- Other housing costs – These are insurances, taxes, and maintenance that come on top of your mortgage.
An annuity mortgage ensures your gross monthly payment remains the same each month, but the ratio of interest to repayment shifts. In a linear mortgage, you pay a fixed amount of repayment each month, causing your debt to decrease faster and your interest and monthly payments to gradually decline.
Why make extra repayments on your mortgage?
Making extra repayments can be attractive because you pay less interest and your monthly payments decrease. Your risk of a residual debt when selling your house is smaller, you pay less wealth tax, and you might fall into a lower risk class, resulting in a lower interest rate. Also, the premium for your life insurance or disability insurance may be lower.
However, keep in mind that extra repayments are not always wise. Your savings decrease, leaving you with less of a buffer for unexpected expenses. Your tax benefit (mortgage interest deduction) also becomes smaller. It is therefore wise to always maintain an emergency buffer before making extra repayments.
Penalty-free repayments
Many mortgage lenders allow you to make extra repayments on a certain percentage of your mortgage annually without a penalty (usually 10–20% of the original mortgage sum). This can significantly reduce your monthly payments. Always check your mortgage conditions to see how much you can repay penalty-free.
Example Calculation
To show the difference between a standard mortgage and a situation where you make a 10% extra repayment at the beginning of the term, we have calculated the monthly payments and total interest for a €300,000 mortgage at 4% interest over 30 years.
| Scenario | Principal | Interest Rate | Term (years) | Monthly Payment | Total Interest |
|---|---|---|---|---|---|
| Standard mortgage | €300,000 | 4% | 30 | €1,432.25 | €215,608.52 |
| After 10% extra repayment | €270,000 | 4% | 30 | €1,289.02 | €194,047.67 |
In this example, you save about €143 monthly and around €21,560 in interest over 30 years.
How to use the Mortgage Repayment Calculator?
Our Mortgage Repayment Calculator makes it easy to simulate your monthly payments. Enter your principal, term, and interest rate to see your monthly payment and total interest cost. Experiment with extra repayments to see how much you can save.
Advice
Choosing the right mortgage type and deciding if extra repayments are sensible for you is a personal matter. Therefore, always consult a mortgage advisor before making major financial decisions. An advisor can help you map out your personal situation and calculate the best choice for you.
Disclaimer: This blog provides general information and not individual mortgage advice. Always consult a professional for personal advice.