Adding an extra $10,000 to your mortgage loan amount can significantly increase your monthly payments. While it may not seem like much compared to the total loan amount, that extra $10,000 can really add up over the life of a 30-year mortgage
We’ll look at how that $10,000 changes your monthly mortgage payment and your overall costs in this article. We’ll also talk about other ways you can lower the amount of your loan and your payments.
How Mortgage Payments Are Calculated
Before we look specifically at the $10,000 amount, let’s review how monthly mortgage payments are calculated. Four key factors go into determining your payment:
- Loan amount – The amount you are borrowing to purchase the home.
- Interest rate – The annual rate charged on the loan, such as 3.5%.
- Loan term – The length of the loan, typically 15 or 30 years.
- Taxes and insurance – The monthly costs for property taxes and homeowners insurance.
Based on the loan amount, rate, and term, you will pay back the loan plus interest. On top of your monthly payment, taxes and insurance are taken care of.
With that background, let’s see how $10000 impacts a sample mortgage.
Impact of $10,000 on a $200,000 Loan
For this example let’s assume we have a 30-year fixed-rate mortgage for $200,000 at 4% interest.
- Original Loan Amount: $200,000
- Interest Rate: 4%
- Loan Term: 30 years
The full amount due on that $200,000 loan plus interest would be $955. It costs $1,305 a month to pay the estimated $350 in taxes and insurance.
Let us now add $10,000 to the loan amount, making it $210,000. Here’s how that impacts the monthly costs:
- New Loan Amount: $210,000
- Interest Rate: 4%
- Monthly Principal & Interest: $1,010 (increased by $55)
- Taxes & Insurance: $350
- New Total Payment: $1,360 (increased by $55)
By increasing the loan amount by $10,000, the monthly principal and interest payment goes up by $55. That’s because we’re now paying interest on a higher loan balance each month.
While an extra $55 per month may not seem very significant, it definitely adds up over the life of the loan.
Over 360 months (30 years), that additional $55/month totals $19,800 in extra interest payments.
Alternative Ways to Reduce Monthly Payments
As you can see, even small changes in your loan amount can noticeably impact your monthly mortgage payment over time. Here are some other ways you could reduce your payment instead of adding extra to the loan amount:
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Make a larger down payment – Putting down 20% instead of 10% cuts your loan amount and interest costs substantially.
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Shorten the loan term – Opting for a 15-year mortgage reduces the amount of interest paid over the life of the loan.
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Lower the interest rate – Pay discount points to buy down your rate or improve your credit score. Even small rate reductions save thousands.
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Reduce taxes and insurance – Shop around for lower homeowners insurance premiums and challenge property tax assessments.
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Buy a less expensive house – The purchase price has a direct impact on loan amount, payments, and interest.
Any of those steps can potentially save you more per month than keeping your loan amount lower by $10,000. Crunch the numbers carefully and see which option works best for your situation.
Key Takeaways on $10,000 and Monthly Payments
Here are some key points to remember:
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Even small changes in your loan amount can significantly impact monthly payments, especially over decades.
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An extra $10,000 added to a 30-year fixed mortgage would increase monthly principal and interest by around $50-$60.
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That extra $50 or so per month results in thousands of dollars in additional interest payments over the life of the loan.
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You may be better off putting that $10,000 towards a larger down payment or paying for discount points to reduce the rate.
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Carefully consider each component that goes into your monthly mortgage payment, not just the loan amount. An adjustment to any part can help lower your costs.
With mortgage rates on the rise, it’s especially important to optimize your loan amount, down payment, rate, and term to keep your payments as affordable as possible. Be sure to use a mortgage calculator to see the impact of any changes and make the most informed decision. Small tweaks can really add up over time and help you save.
Calculating costs in addition to principal and interest
To fine-tune your payment, you can enter your yearly property tax, yearly home insurance premium, and monthly homeowner association fee into this calculator.
The “Amortization Schedule” tab displays how much youll pay in principal and interest each month, as well as the remaining amount you owe (“Principal balance”) after making that payment.
Explanation of terminology
- Down payment: The cash you pay upfront. You borrow the difference between the home’s price and your down payment.
- This is how much the lender charges you to borrow the money. Interest rates are expressed as an annual percentage. A lower interest rate gives you a smaller monthly payment.
- Loan term (years): The term is the number of years it will take to pay off the bank loan. The monthly payment is less for a longer term than for a shorter term. The longer term, on the other hand, means you pay more interest because you pay it for longer.
- Property taxes are the yearly fees that the government charges you for your home and land. Together with your mortgage payment, you give the servicer about a twelfth of your yearly tax bill. They keep this money in an escrow account. When the taxes are due, the loan servicer pays them.
- When you have homeowners insurance, it pays for damage and lost wages caused by things like fire, storms, theft, a tree falling on your house, and other bad events. You pay about a twelfth of your annual premium every month, just like with property taxes. The servicer pays the bill when it’s due.
- If you live in a neighborhood with a homeowners association, you may have to pay a fee every month. Most of the time, these fees are charged separately from the monthly mortgage payment. It’s easy to forget about HOA fees when figuring out how much it costs to own a home, so NerdWallet’s mortgage calculator lets you enter them here.
What Paying an Extra $1000/Month Does To Your Mortgage
FAQ
Should you add a mortgage payment a month?
Adding just one more payment a month could save you thousands of dollars in interest and help you get out of debt faster. Eliminate your monthly mortgage payment and enjoy the additional cash flow. No longer having a mortgage payment means you can now use those funds to invest.
How much does it cost to increase a mortgage payment?
In general, estimate about $5 per $1,000 or $20 per $5,000 increase in the purchase price. Although it does differ slightly as interest rates fluctuate, this is the easiest way to estimate changes in your monthly payment. How much does 100000 add to a mortgage payment?.
How many bi-weekly mortgage payments can you make a year?
There are 26 bi-weekly periods in the year, but making only two payments a month would result in 24 payments. Instead of paying twice a week, you can achieve the same results by adding 1/12th of your mortgage payment to your monthly payment. Over the course of the year, you will have paid the additional month.
How often do you pay extra on a mortgage?
Making mortgage payments every two weeks is one of the most common ways that people pay more on their loans. There is an extra mortgage payment every year because payments are made every two weeks instead of just twice a month. There are 26 bi-weekly periods in the year, but making only two payments a month would result in 24 payments.
How do I use the additional payments mortgage calculator?
This additional payments mortgage calculator makes it easier to estimate your potential savings and payoff date. Below is a detailed summary of how to enter the appropriate loan information for a new or existing mortgage: Loan type. Choose “purchase” if you plan on buying a home and making extra payments immediately.
How much does a 30-year mortgage cost per month?
At a 4% fixed interest rate, your monthly mortgage payment on a 30-year mortgage might total $477.42 a month, while a 15-year might cost $739.69 a month. Other costs and fees related to your mortgage may increase this number. How much is a 250k mortgage per month?
How much does a mortgage payment increase for every $5000?
How much mortgage can I get for $10,000 a month?
| Monthly Pre-Tax Income | Maximum Monthly Mortgage Payment Using 36% Rule | How Much You Can Afford |
|---|---|---|
| $4,000 | $1,440 | $308,000 |
| $6,000 | $2,160 | $462,000 |
| $8,000 | $2,880 | $531,000 |
| $10,000 | $3,600 | $666,000 |
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What is the monthly payment on a $600000 mortgage?