Finance Runs locally Ready to use Built-in examples No tracking

Mortgage Prepayment Calculator

Compare interest savings from shortening the term versus reducing the monthly payment after a lump-sum prepayment.

With a lump sum in hand, should it go against the mortgage? The answer turns on two things: how the prepayment is applied — keeping the payment and shortening the term, or keeping the term and cutting the payment — and what the money would earn elsewhere. Enter the outstanding balance, the rate, the remaining term and any early-repayment charge, and both options are costed with the interest saved and the net saving after the charge.

Shortening the term saves far more interest than reducing the payment, because the principal is repaid faster and there is less balance for the rate to work on. Early-repayment charges follow the contract — often 1% of the amount repaid, and usually waived after the first year. The other half of the decision sits outside this tool: if the money would earn more than the mortgage rate, investing it wins, and this page only prices the mortgage side.

%
%
—
—
—
—
—

How to use

  1. Enter the outstanding balance, the annual rate, the remaining term and the prepayment amount.
  2. Add any early-repayment charge.
  3. Compare the two options: shorten the term, or reduce the monthly payment.
  4. Check the net saving after the charge and weigh it against your alternative return.

How it works

Shortening the term vs. lowering the payment

Shorten the term (payment unchanged): after prepayment you keep the original payment and settle early with a shorter term, paying the least total interest. Lower the payment (term unchanged): the remaining periods stay the same and the remaining principal is spread anew, lowering the payment and easing cash flow but saving less interest. Take what you need.

How prepayment savings are computed

Savings = original planned remaining interest - remaining interest after prepayment. For 1,000,000 remaining principal at 3.1% over 300 periods, prepaying 200,000: the original remaining interest is about 438,300; shortening the term saves about 190,200, lowering the payment about 87,700 — the difference comes from "less time using the funds."

Whether to include the penalty

Many banks charge a prepayment penalty, commonly 1-3% of the prepaid amount or a few months' interest. This tool lists the penalty rate separately and gives the "net saving after penalty" as the main result, so you don't look only at interest saved and ignore the cost.

Code example

JavaScript Two ways to prepay 

function monthlyPayment(principal, r, n) {   // equal-instalment monthly payment
  return principal * r * Math.pow(1 + r, n) / (Math.pow(1 + r, n) - 1);
}

function prepay(principal, annualRate, monthsLeft, prepayAmt) {
  const r = annualRate / 12;
  const rest = principal - prepayAmt;
  // Shorten the term: keep the payment, solve for the remaining periods
  const m = monthlyPayment(principal, r, monthsLeft);
  const nShort = Math.ceil(
    -Math.log(1 - rest * r / m) / Math.log(1 + r));
  // Lower the payment: keep the term
  const mLower = monthlyPayment(rest, r, monthsLeft);
  return { nShort, mLower,
    saveShort: m * monthsLeft - m * nShort - prepayAmt,
    saveLower: (m - mLower) * monthsLeft };
}

Python The same formulas in Python 

import math

def monthly_payment(p, r, n):
    return p * r * (1 + r) ** n / ((1 + r) ** n - 1)

def prepay(p, rate, n_left, prepay_amt):
    r = rate / 12
    rest = p - prepay_amt
    m = monthly_payment(p, r, n_left)
    n_short = math.ceil(-math.log(1 - rest * r / m) / math.log(1 + r))
    m_lower = monthly_payment(rest, r, n_left)
    return n_short, m_lower, m * n_left - m * n_short - prepay_amt, \
           (m - m_lower) * n_left

# Shortening the term saves more interest than lowering the payment (the principal is repaid faster)

FAQ

Shorten the term or lower the payment?

It depends on the goal: for the fastest payoff and lowest total cost, shorten the term; to lower the payment and ease cash flow (income swings, other investment plans), lower the payment. If funds are idle long-term and returns are below the loan rate, shortening is better.

Why does earlier prepayment save more?

Early mortgage payments are mostly interest and little principal, so repaying principal earlier shrinks the basis that later accrues interest. By the late stage, remaining interest is already small, so prepayment saves noticeably less.

How do I confirm the penalty?

Rules vary by bank: common ones include "waived after a year of payments," "1-3% of the prepaid amount," or "a few months' interest," and some cap the annual number and amount of prepayments. Read the contract carefully or call the lending bank before signing.

Do I still make payments after prepaying?

Yes. Prepayment only reduces principal; the remaining loan continues monthly per contract. Shortening the term keeps the payment and reduces periods; lowering the payment keeps periods and reduces the payment, until fully settled.

Is partial prepayment or full settlement better?

If the loan rate is below your reliable investment return, keeping the low-rate debt is usually better, favoring partial prepayment; if the rate is high and your cash sits idle, full settlement saves the most interest. Also weigh the possible full-amount penalty and the lost emergency-cash flexibility.

Should a housing-fund loan be prepaid too?

Housing-fund rates are usually well below commercial (about 2.6-3.1%), so prepayment saves less. If you have a steady channel beating that rate, or need cash for emergencies, repay the higher-rate commercial portion first and keep the housing-fund loan on schedule.

What else after repaying the loan?

Generally: obtain the settlement certificate and other-rights certificate from the bank and release the mortgage at the real-estate registration center; if you bought mortgage insurance or a guarantee, apply to refund the unused premium and deposit. Without these steps the property still shows as mortgaged, affecting later transfers or re-mortgaging.

Can anyone see the mortgage balance I enter?

No. The remaining principal, prepayment amount and penalty rate are computed locally, not uploaded or stored, so we can't see them. History stays in local browser storage and is clearable; for no trace, compute in an incognito window and close.

How do I recompute after an LPR adjustment?

Mortgage rates are repriced usually on January 1 or the disbursement anniversary; after adjustment the remaining principal is unchanged but the payment or periods change. Enter the new rate and remaining periods into this tool; if the bank keeps the payment and changes the periods, use "shorten the term" mode to match.

Do banks limit the number and amount of prepayments?

Yes. Common limits: only after a year of payments; 1-2 times yearly; at least 10,000 or a multiple of 10,000 each; a 15-30 day advance booking; and some banks set separate quotas for online channels. Before planning, confirm "number/minimum amount/booking period/penalty" with customer service, then decide between one full prepayment or several partial ones.

Do equal-principal and equal-installment save the same on prepayment?

The essence of saving is "the repaid principal no longer accrues interest over the remaining term," so it depends only on remaining principal, rate and remaining term — not on the repayment method. The difference is that at the same point the two methods have different remaining principals: equal-principal repays more principal early, so its remaining principal is smaller, and for a 200,000 prepayment the interest saved is slightly less than equal-installment. Enter the "remaining principal" as the true figure on your statement.