Dear Dr. Don,
I've looked at Bankrate's mortgage amortization calculators. However, I am trying to calculate how much faster a loan pays off when extra payments are made to principal. These principal payments would start after the loan is three years into the initial term.

I don't see an option to add $X amount to the principal with a starting date. I see where it says $X amount yearly, but not on a monthly basis. How can I calculate the payoff date?
-- Marlene Matrice

Dear Marlene,
It's pretty easy to use Bankrate's Mortgage payment calculator in a two-step process to achieve the result you're attempting to model. First, input the parameters of the initial loan. Then, go to the amortization schedule to find the loan balance at the end of three years.

Finally, change the loan term to 27 years, change the loan amount to the loan balance at the end of year three and input the amount of the monthly additional principal payment. Recalculate the amortization schedule and you're done. The amortization schedule will tell you how long it takes to pay off the remaining 27-year loan after considering the additional principal payments. Add three years to that payoff date and you have the final payoff date.

Here's an example that you can use to model your situation:

In this example, starting to pay an extra $300 a month in the third year reduces a 30-year fixed rate mortgage of $200,000 at 6 percent to roughly a 20-year mortgage. Making the additional principal payments saves you about $80,000 in interest expense on a pretax basis. The savings are less on an after-tax basis if you can use the mortgage interest deduction to reduce your federal income taxes.

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