How to use
Enter the loan amount, interest rate, full term in months and the repayment type. Then add your extra payments: after which payment, the amount, how often (one time, monthly, quarterly or yearly — until the loan ends) and whether it should shorten the term or lower the payment. Add as many as you like: for example, a one-time $20,000 after payment 60 plus $200 every month after payment 72.
You’ll see the interest saved and how much sooner the loan is paid off, a comparison of your plan with “everything to a shorter term” and “everything to a lower payment”, a chart of the balance with and without extra payments, and the full schedule. Works for fixed payments and equal-principal loans. Amounts are rounded to the cent each month, as on a lender’s amortization schedule.
Shorter term or lower payment?
If you shorten the term, your payment stays the same and the loan is paid off sooner. If you lower the payment (lenders often call it recasting), the term stays the same and the monthly payment drops. Shortening the term almost always saves more interest, because the same payment keeps going mostly to principal.
Example
A $300,000 mortgage at 7% for 30 years has a payment of $1,995.91. After 60 payments, you make a one-time extra payment of $20,000:
- shorter term — 251 payments left instead of 300 (paid off 4 years 1 month sooner), saving $79,059.96;
- lower payment — new payment $1,854.55, saving $22,404.46.
FAQ
Is there a prepayment penalty? Most US mortgages today don’t have one, and federal rules limit them on many loans. Some loans do — check your loan documents or ask your servicer before paying extra.
When is prepaying most effective? Early in the loan, when most of each payment goes to interest.
Does my lender recast automatically? Usually not: extra payments shorten the term by default, and a recast may need a request and a fee.
Are taxes, insurance or PMI included? No — only loan interest.
Results are estimates; lenders may calculate interest differently. You can add the same extra payments in the mortgage calculator (with a down payment and a term in years) or the loan calculator, and compare a lower rate with the refinance calculator.