This mortgage payoff calculator makes it easier to see how making biweekly or additional payments might reduce interest costs and shorten the mortgage term.

If the remaining loan term is known to you

If you know how long the remaining loan will last and you have information about the original loan, use this calculator. It works well for both new and existing loans that have never had any additional payments from other sources.

If the remaining loan term is unknown to you

If you are unsure about the remaining loan’s term duration, use this calculator. The monthly or quarterly mortgage statement shows the interest rate, monthly payment amounts, and the amount of the principal that has not been paid.

Mortgage Payoff Calculator

Calculate View Amortization Table

The previously mentioned Mortgage Payoff Calculator facilitates the evaluation of the many mortgage payoff options, including loan repayment every two weeks, one-time or periodic additional payments, or full repayment. It calculates the difference in payoff time, the interest savings for different payout options, and the remaining payoff time.

A mortgage’s principal and interest

Typically, a loan repayment consists of principal and interest. Interest is the expense to the lender of borrowing that money, whereas principal is the amount borrowed. This interest fee is typically stated as a percentage of the principal amount due. Usually, the amortization plan for a mortgage loan includes both principal and interest.

Each payment will be made with the principal getting the remaining money after the interest has been paid off. Since the remaining sum on the total principal requires higher interest rates, a bigger share of the payment will initially be paid to interest. But when the principal amount outstanding drops, so will interest costs. With each subsequent payment, the amount of principal paid rises while the portion allocated to interest falls.

The interest will be paid off first in each payment, with the remaining sum going to the principle. Since higher interest rates are required for the remaining balance on the total principal, a larger share of the payment will initially be applied to interest. However, when the main amount outstanding falls, interest costs will also fall. As a result, the portion allocated to interest falls with each succeeding payment, while the amount of principal paid rises.

This is exactly what the Mortgage Payoff Calculator and the accompanying Amortization Table show. The Mortgage Payoff Calculator will compute the relevant data after the user enters the necessary information.

Some borrowers may choose to pay off their mortgage early in order to save money on interest, in addition to selling their house to pay off the loan. The following are some methods that can be used to pay off the mortgage early:

Additional Payments

The Mortgage Payoff Calculator and the accompanying Amortization Table demonstrate this precisely. After the user enters the required data, the Mortgage Payoff Calculator will calculate the pertinent data.

In addition to selling their home to pay off the loan, some borrowers may decide to pay off their mortgage early in order to reduce interest costs. Some strategies to pay off the mortgage early include the following:

Extra Payments

Biweekly payments are another way to pay off the mortgage sooner. This means that every two weeks, half of the standard mortgage payment must be made. This method yields 26 half payments over the 52 weeks in a year. As a result, debtors pay one additional month each year, or the equivalent of 13 full monthly payments at the end of the year. For people who get paid every two weeks, the biweekly payments option is appropriate. In these situations, borrowers can set aside a specific sum from each paycheck to pay off their mortgage.

Switch to a shorter-term refinance

Refinancing, or obtaining a new mortgage to settle an existing one, is an additional choice. For instance, a borrower has a $200,000 mortgage with 20 years left on it, with a 5% interest rate. This borrower’s monthly payment will decrease from $1,319.91 to $1,211.96 if they are able to refinance to a new 20-year loan with the same principal and a 4% interest rate. Over the course of the loan, the interest savings will total $25,908.20.

Both shorter and longer terms are available to borrowers who refinance. Lower interest rates are frequently associated with shorter-term loans. However, in order to refinance, consumers will typically have to pay closing charges and fees. To determine whether refinancing is advantageous financially, borrowers should perform a compressive review. Visit our to assess your refinance alternatives.

Penalties for Prepayment

If the borrower pays off the loan early, some lenders could impose a prepayment penalty. Lenders view mortgages as lucrative investments that generate income for years to come, therefore they don’t want their money-making assets to be jeopardized.

Lenders compute prepayment penalties in a variety of ways. 80% of the interest the lender would get over the following six months could be charged as a penalty. A percentage of the outstanding sum may also be added by the lender. These fines can add up to significant costs, particularly in the early phases of a mortgage.

Prepayment fines, however, are now less frequent. These potential costs often expire after a specific amount of time, such the fifth year, if the lender specifies them in a mortgage deal. To fully understand how prepayment penalties relate to their loan, borrowers should either read the fine print or ask the lender. Prepayment penalties are not allowed on FHA, VA, or any other loan insured by a federally authorized credit union.

Costs of Opportunity

Those who wish to pay off their mortgage sooner should think about the opportunity costs, or the advantages they may have had if they had made a different decision. For every dollar spent for a certain purpose, there are financial opportunity costs.

One kind of loan with a comparatively low interest rate is a home mortgage, and many people view mortgage prepayments as the same as making low-risk, low-reward investments. Therefore, before adding additional payments to a mortgage, homeowners should think about paying off lesser debts like student or vehicle loans or high-interest obligations like credit cards.

Moreover, other asset profits can surpass mortgage interest rates. Several of these alternative investments may generate returns higher than the savings from mortgage repayment, despite the fact that no one can predict the future direction of the market. An individual would have been better off in the long run if they had invested a certain amount of money in a portfolio of stocks that produced 10% yearly rather than maintaining their existing mortgage at a 4% interest rate. Mortgage holders can invest in real gold, corporate bonds, and a host of other options in place of further payments.

Additionally, before making additional mortgage payments, borrowers should think about making contributions to tax-advantaged accounts like an IRA, a Roth IRA, or a 401(k), as most borrowers also need to save for retirement. In this manner, they stand to gain substantial tax savings in addition to the potential for increased returns.

For instance

Ultimately, people must assess their particular circumstances to decide if raising monthly mortgage payments is the most cost-effective course of action. A few examples are as follows:

Example 1: Christine desired the joy that comes with being the sole owner of a stunning home. She made the decision to add additional payments to her mortgage in order to accelerate the payoff after confirming that she would not be subject to prepayment penalties.

Christine once went to lunch with a buddy who is a financial advisor. Her buddy clarified that by paying off the high-interest amount she currently owed on her three credit cards, she could avoid further interest charges. While the mortgage only had a 5% interest rate, some of the cards had rates as high as 20%. An excessively significant portion of her salary was consumed by these payments. Christine can lower her interest expenses more rapidly by paying off these high-interest bills first.

Example 2: Apart from the mortgage on his family’s house, Bob has no other debt. Credit card debts, auto loans, and student loans have all disappeared. He is unable to choose between investing in the stock market or making additional mortgage payments with his discretionary money. His mortgage has a 4% interest rate, but over time, the market has produced larger profits.

Bob could alternatively decide to increase his contributions to his almost-empty emergency fund. His financial advisor brought up the important point that Bob’s business has been firing staff members lately. Bob was even forewarned by his management that he might be next in line.

In this case, Bob ought to accumulate an emergency fund prior to making additional mortgage payments or market investments.

Example 3: Apart from the mortgage on his home, Charles has no other debt. He works at a reliable job, has saved extra money, maxed up his tax-advantaged accounts, and established a substantial six-month emergency fund. Charles will be retiring in a few years. As a result, he is not interested in making investments that are comparatively riskier, like buying individual equities. Charles’s financial advisor advises him to pay off his mortgage sooner in order to save interest costs. In this manner, he can start his retirement with a house that is completely paid for.