1. What is the Home Loan Prepayment Calculator?

The Home Loan Prepayment Calculator helps you understand how making additional payments toward your mortgage principal can reduce your loan term and total interest paid.

2. How Does the Calculator Work?

The calculator uses the standard loan payment formula:

Where:

• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Number of months in loan term
• \( PMT \) — Monthly payment amount

Explanation: The calculator then applies your additional prepayment amount directly to principal and recalculates the amortization schedule to determine your new loan term and interest savings.

3. Importance of Prepayment Calculation

Details: Even small additional payments can significantly reduce your total interest paid and shorten your loan term. This calculator helps visualize those savings.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, and term. Then add any additional monthly payment you plan to make toward principal. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with prepayments?
A: Savings depend on your loan amount, interest rate, and prepayment amount. Even $100/month extra can save thousands in interest.

Q2: Are there prepayment penalties?
A: Some loans have prepayment penalties. Check your loan documents before making extra payments.

Q3: Should I prepay or invest?
A: This depends on your interest rate vs. potential investment returns. Prepaying gives a guaranteed return equal to your loan rate.

Q4: How often should I make prepayments?
A: Regular monthly prepayments have the greatest impact, but even occasional lump sums help reduce principal.

Q5: Does this work for all loan types?
A: This calculator works best for standard fixed-rate mortgages. Adjustable-rate mortgages require more complex calculations.