Mortgage Prepayment Calculator
Calculate how extra mortgage payments can accelerate your payoff and reduce total interest paid. This calculator shows the impact of different prepayment strategies on your mortgage timeline.
Payoff Comparison
Savings Analysis
Prepayment Summary
Effective Prepayment Strategies
Round Up Payments
Round your regular payment up to the nearest $50 or $100. Easy to implement and adds up over time.
Low effort, consistent results
Annual Windfalls
Apply tax refunds, bonuses, or gifts as extra principal payments once per year.
High impact, periodic
Bi-Weekly Payments
Pay half your monthly payment every two weeks, resulting in one extra monthly payment per year.
Automated, effective
Recurring Extra Payments
Set up automatic extra payments for a fixed amount each month.
Consistent, predictable
Lump Sum Payments
Make large one-time payments when you have access to extra cash.
Maximum impact, situational
Prepayment Planning
Create a prepayment schedule and track progress toward your goals.
Strategic, goal-oriented
Understanding Mortgage Prepayment
Mortgage prepayment involves making extra payments toward your loan principal to reduce the balance faster than required. This strategy can significantly reduce total interest paid and shorten your loan term, but it's most effective when done consistently over time.
How Prepayment Works
Extra payments are applied directly to your loan principal. Since interest is calculated on the remaining balance, reducing principal lowers future interest charges. This creates a compounding effect where each extra payment becomes more valuable over time.
Benefits of Prepayment
- Interest Savings: Reduce total interest paid over the loan life
- Faster Payoff: Become debt-free sooner
- Equity Building: Increase home equity faster
- Financial Freedom: Lower housing costs in retirement
- Peace of Mind: Security of owning your home outright
Prepayment Considerations
- Opportunity Cost: Consider if extra money could earn higher returns elsewhere
- Emergency Fund: Ensure you have adequate savings before prepaying
- Tax Implications: Mortgage interest deduction may be affected
- Prepayment Penalties: Some loans charge fees for early payoff
- Cash Flow: Don't sacrifice current financial stability
Timing Your Prepayments
Prepayments are most effective early in your loan term when interest makes up the largest portion of your payment. As your loan matures and the principal portion increases, the impact of extra payments diminishes slightly.
Prepayment vs. Investment
Compare the guaranteed return from prepayment (your mortgage rate) with potential returns from investments. If your mortgage rate is higher than expected investment returns, prepayment may be more beneficial. However, consider risk and liquidity needs.
Tip: Start with small, consistent extra payments you can afford to maintain. Even $50-100 extra per month can save tens of thousands in interest and help you pay off your mortgage years earlier. Track your progress and adjust as your financial situation changes.