Prepayment Calculator
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Guide to the Prepayment Calculator
The Mortgage Prepayment Calculator estimates the impact of making extra payments on your mortgage loan. It helps you figure out how much you will save in interest by paying off your loan faster.
How to Use the Prepayment Calculator?
Using the calculator is simple. Just follow these steps and provide your current mortgage details:
Definition of Inputs
- Loan Amount: The total original amount of money you borrowed.
- Loan Term: The duration over which you originally agreed to repay the loan (in years).
- Interest Rate (%): The annual interest rate of your mortgage.
- Paid Periods: The number of months you have already made payments on the loan.
- Prepayment Amount: The one-time extra lump sum you plan to pay to reduce your principal balance.
Understanding the Results
- Interest Savings: The total amount of interest you will avoid paying over the life of the loan by making this extra payment.
- Monthly Payment: Your standard monthly payment amount, which usually remains unchanged while the loan term shortens.
Mortgage Prepayment Knowledge
Pros of Mortgage Prepayment
- You pay less money in overall interest and pay off your mortgage faster.
- It's a guaranteed return on your money equivalent to your mortgage interest rate.
- You build home equity sooner, moving you closer to full homeownership.
Cons of Mortgage Prepayment
- Some lenders charge prepayment penalties which could negate your savings.
- It locks up cash in your home, making it harder to access during an emergency.
- You might earn a higher return by investing the extra money elsewhere instead.
Disclaimer
This calculator is for estimation and instructional purposes only. Actual interest savings and loan impacts may vary depending on your specific loan contract, prepayment penalties, and precise date of payment.