Should I choose reduce term or reduce payment?

Reducing the term saves more total interest, while reducing the monthly payment improves cash flow. Compare both options to see which works better for your situation.

Are there penalties for early repayment?

Some lenders charge prepayment penalties, especially in the first few years of the loan. Check your loan agreement for specific terms regarding early repayment fees.

💳 Early Repayment Calculator

See how early repayment affects your total interest

Loan Amount ($)

Annual Interest Rate (%)

Loan Term (years)

Payments Made (months)

Early Payment Amount ($)

Early Repayment Method

Interest Saved

$137,092.13

Term shortened by 12.3 years

Original Payment

$1,264.14

New Payment

$1,264.14

Original Total Interest

$255,088.98

New Total Interest

$117,996.84

Before vs After

Total InterestSaved $137,092

Before

$255.1k

After

$118.0k

Total PaymentSaved $137,092

Before

$455.1k

After

$318.0k

Early Repayment Calculator Guide

This calculator helps you evaluate the savings from making early mortgage repayments. Enter your loan details, number of payments made, and the early repayment amount to calculate interest savings and shortened loan term.

There are two early repayment strategies: shortening the term (keeping the same monthly payment, paying off sooner) and reducing the monthly payment (keeping the same term, lowering payments). Shortening the term saves more interest.

Is Early Repayment Worth It?

Whether it's worth it depends on these factors:

1. Mortgage rate: If your rate is higher than what you could earn from investments (e.g., above 4%), early repayment is generally better 2. Repayment stage: With fixed payments, interest is front-loaded — the earlier you make extra payments, the more you save 3. Prepayment penalties: Some lenders charge fees for early repayment within the first 1-3 years (typically 1%-3% of the prepaid amount), so calculate net savings 4. Opportunity cost: Could the extra money earn more through other investments?

When mortgage rates are low and investment returns can exceed your mortgage rate, there may be no rush to prepay.

FAQ

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Early Repayment Calculator Guide

This calculator helps you evaluate the impact of making an early lump-sum payment on your loan. Enter your original loan details and the amount you plan to prepay to see how much interest you can save.

Two repayment methods are available: "Reduce Term" keeps your monthly payment the same but shortens the loan duration, while "Reduce Payment" keeps the original term but lowers your monthly payment.

Early Repayment Calculation Formula

Reduce Term Mode:
1. Calculate remaining principal based on payments made
2. New Principal = Remaining Principal - Early Payment Amount
3. Keep original monthly payment, calculate new term
4. New Total Interest = Monthly Payment × New Term - New Principal
5. Interest Saved = Original Total Interest - New Total Interest
6. Years Saved = Original Remaining Term - New Term

Reduce Payment Mode:
1. Calculate remaining principal
2. New Principal = Remaining Principal - Early Payment Amount
3. Keep original remaining term, recalculate monthly payment
4. New Monthly Payment = New Principal × r × (1+r)^n / [(1+r)^n - 1]
5. Interest Saved = Original Total Interest - New Total Interest

Early Repayment Examples

📋

Example 1: $50,000 early payment after 3 years Original loan: $200,000, Rate: 6.5%, Term: 30 years, Payments made: 36 months Early payment: $50,000 Method A - Reduce Term: - Original monthly payment: $1,264.14 → stays the same - Interest saved: approximately $62,000 - Term shortened by approximately 8 years Method B - Reduce Payment: - Original monthly payment: $1,264.14 → New: approximately $935 - Monthly reduction: approximately $329 - Interest saved: approximately $40,000 - Term remains 27 years Reduce term saves approximately $22,000 more in interest than reduce payment. Example 2: $100,000 early payment after 5 years Original loan: $400,000, Rate: 6.5%, Term: 30 years, Payments made: 60 months Early payment: $100,000, Reduce Term - Monthly payment stays the same - Interest saved: approximately $115,000 - Term shortened by approximately 10 years

Important Notes

💡

1. Prepayment penalties: Some lenders charge fees for early repayment, especially within the first 1-3 years. Check your loan agreement for details. 2. Payment application: Confirm with your lender that the early payment will be applied directly to principal, not to future payments. 3. Minimum payment amounts: Some lenders require minimum early payment amounts. 4. Application process: Most lenders require you to submit a request for early repayment rather than simply sending extra money. 5. Opportunity cost: Compare the interest savings against potential returns from investing the same amount elsewhere. 6. Results are for informational purposes only and should not be considered financial advice.

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