Loan Prepayment Calculator

Extra payments go directly toward reducing your principal balance, which means less interest accrues over the life of the loan. This can save you thousands of dollars in interest and shorten your loan term by years. For example, adding $200/month to a $300,000 mortgage at 6.5% can save over $80,000 in interest and pay off the loan 6+ years early.

Some loans include prepayment penalties that charge you a fee for paying off the loan early. These are more common in older mortgages and certain types of personal loans. Check your loan agreement or contact your lender before making extra payments. Most conventional mortgages originated after 2014 do not have prepayment penalties due to federal regulations.

When you make an extra payment, it should be applied to principal, not interest. Reducing principal directly lowers the amount of interest charged in subsequent periods. Always confirm with your lender that extra payments are being applied to principal, as some lenders may apply them to future payments instead.

Biweekly payments split your monthly payment in half and pay every two weeks. Since there are 52 weeks in a year, you make 26 half-payments, which equals 13 full monthly payments instead of 12. This extra payment per year goes toward principal and can shave several years off a 30-year mortgage.

This depends on your loan interest rate versus expected investment returns. If your loan rate is higher than your after-tax investment return, prepaying saves more. If investment returns exceed your loan rate, investing may be better financially. Also consider factors like risk tolerance, tax deductions on mortgage interest, and the guaranteed return of debt reduction.