Mortgage Prepayment Calculator – NerdWallet

How do I prepay my mortgage?

One way to pay off your mortgage early is to add an extra amount to your monthly payments. But how much more should you pay? NerdWallet’s prepayment calculator calculates it for you.

Fill in the fields with information about your home loan, then enter how many years you still want to pay it off. The calculator not only tells you how much more you need to pay each month to pay off your principal faster; it also shows how much you will save in interest.

What the mortgage prepayment calculator does

Do you want to pay off your mortgage early? You might have 27 years left on your mortgage, but you’d rather pay it off in 18 years. The Early Earnings Calculator shows how to reach your goal.

The mortgage repayment calculator shows you:

  • How much additional principal you would have to pay each month to be able to repay the loan in a certain number of years.

  • How much interest would you save by paying off the loan early?

There are many reasons why you might want to speed up your mortgage repayment, but the motivation usually boils down to one or both:

  • You want to own your home for free and safely before a major milestone in life, like your retirement or the start or end of your children’s college years.

  • You want to reduce the total interest you pay over the life of the loan.

To pay off the mortgage on a regular and early basis, you need to know how much more to pay for the principal balance each month to reach that goal. This calculator allows you to do that.

When paying off mortgage principal faster, keep in mind that each managing agent has their own procedures to ensure that your additional payments go to the principal balance rather than future payments. Contact your service representative for instructions.

How to use the mortgage prepayment calculator

To correctly complete the calculator boxes, consult a recent monthly statement or the first page of the Closing disclosure that you received when you closed your mortgage.

  • Under Loan term (in years), enter the number of years for which your house is financed.

  • Under What was the amount of your mortgage?, indicate the loan amount. In the closing disclosure, you can find it on the first line of the Loan Terms section.

  • Under Interest rate, enter the percentage.

  • Under How many years are left on your mortgage?, you will need to enter a whole number, so round up or down.

  • Likewise, under In how many years do you want to pay off your mortgage?, you will need to enter a whole number, rounded up or down.

  • Under How much do you still owe (your outstanding balance)?, look for this number in a recent monthly statement, or contact the mortgage manager. Or you can use NerdWallet mortgage amortization calculator and drag the slider to find out how much you still owe.

What the mortgage repayment calculator tells you

The Summary of Findings section has two subheadings:

  1. How to reach your goal describes how much you would have to pay in principal and interest each month to meet the return target. It lists the initial principal and interest payment and the amount you will need to add to the minimum monthly payment to reach your goal.

  2. Summary of loan comparison describes the total cost of the mortgage in principal and interest, the initial monthly payment of principal and interest, the total cost of principal and interest if you pay it off early, and the new monthly payment of principal and interest to reach your goal of gain.

“New Monthly P&I” and “Original Monthly P&I” include only the principal and interest of your monthly payments. Your full monthly payment will include principal and interest, as well as other monthly costs, such as taxes, home insurance and mortgage insurance (if applicable).

The mortgage prepayment calculator also allows you to enter different numbers in the field “In how many years do you want to pay off your mortgage?” to see how these changes affect your total savings.

Other ways to pay off a mortgage early

To pay off a mortgage early, you need to make additional payments. But there is more than one way to pay off the mortgage early:

  • Add a supplement to the monthly payments, as discussed in this article.

  • A structured way to add an extra: divide your monthly principal payment by 12, then add that amount to each monthly payment. You end up making 13 payments, instead of the required 12, each year.

  • A variation of the above tip: Deposit one-twelfth of the main monthly payment into a savings account each month, then use that money to make a 13th payment.

  • Pay half of a mortgage payment every two weeks. You make 26 half payments, or 13 full payments per year. If you want to try this, first make sure your mortgage manager is set up to receive bi-weekly payments.

  • Make a lump sum payment towards the principal. You can do this after receiving a bonus, inheriting the money, or winning a lottery prize – any time a large sum lands in your checking account. Coordinate with your service agent to make sure the money is used to reduce capital.

  • Shorter-term refinancing. If you can refinance at a lower interest rate, for a shorter term, it’s a win-win. For example, you can refinance a 30 year mortgage into a 15 year loan. The monthly payments will almost certainly be higher and you will pay the closing costs, but your overall interest costs will be considerably lower.

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