Mortgages can be viewed very differently. Some see them as a positive financial instrument, a way to free up their money so it can be invested elsewhere, ideally for a better return. Then there are those who view mortgages as the root of all evil, as a debt overhang that must be terminated as quickly as possible. Whatever your stance, you've probably entertained the idea of making "extra mortgage payments," though you may not know the exact impact, due to the complexity of mortgage amortization.
Fortunately, there are calculators available -- like AOL Real Estate's mortgage calculator -- that take the guesswork out of the process and make it easy to see how much you can save in a number of different scenarios.
Adding $10 a Month
Let's start with a simple scenario where you add just $10 a month in extra payment to principal. Assuming you've got a $100,000 loan amount set at 4 percent on a 30-year fixed mortgage, that extra $10 payment would save you $3,191.78 over the full loan term. It would also shorten your mortgage by 13 months, meaning your 30-year mortgage would be a 28-year-ish mortgage. So that's good news, right? You save thousands and you only have to pay a measly $10 extra per month. You probably wouldn't even notice the difference. What if you bumped up that extra payment to $25? Well, you would shave 32 months off your mortgage, nearly three years, and reduce total interest by $7,450.01. Feeling ambitious? Add $100 a month and you reduce your term by 101 months, or nearly 8.5 years, while saving $22,463.76 in interest.