How to use the Mortgage Payoff Calculator
Our early mortgage payoff calculator uses information about your current loan to determine how quickly you can pay off your mortgage by making extra payments. It will also show how much less you’ll pay in interest and how much money can save with an early payoff approach.
Gather the following information to make the payoff calculation more accurate:
The original mortgage loan amount, the original term of the loan (number of years financed) and the interest rate on the loan
The number of years remaining on the loan
The amount of extra money you’re able to pay each month toward your mortgage
The calculator will then estimate how early your mortgage could be paid off when you make accelerated payments consistently, each month.
Tips to pay off your mortgage early
Dreaming of true homeownership — where you no longer have to think about monthly payments because your mortgage is paid off? There are some different approaches to make it a reality sooner than you might think.
Make accelerated payments
A common way to pay off a mortgage early is to carve out money in your budget and add it to your monthly payment, which is the approach used in our calculator. The addition of just a few hundred dollars each month can cut years from the time it takes you to pay off your mortgage.
Make a 13th payment each year
A common early loan payoff strategy is to make an additional principal payment each year. A variation is to divide the regular payment amount by 12 and add that amount to each monthly payment.
Make a one-time payment with your work bonus or a financial windfall
If you receive any kind of windfall — such as a work bonus, large commission or inheritance — put some or all of it towards your mortgage.
Note: Check with your lender to see if there’s a prepayment penalty
Some lenders restrict how borrowers pay off a mortgage, including charging prepayment penalties. While penalties are not common, be sure to check with your lender first to be sure your early payoff plans won’t come at a cost. These terms can be found in your loan disclosure documents that you would have received a closing.
For more detailed insights, checkout tips for paying off your mortgage.
Making financial tradeoffs when accelerating payments
Having your home paid off seems like a great idea. And in many cases, it’s a smart financial move. You’ll save a lot of money and enjoy that dream of true homeownership sooner than if you stick to your regular mortgage payments.
But making accelerated payments may not always make sense and could put a strain on other important areas of your financial life, including in these situations:
You have other loans with higher interest rates than your mortgage
If you have loans or debts with higher interest rates than your mortgage, it may make sense to pay those off first. Dollar for dollar, they cost you more than your mortgage. This strategy is often called the Debt Avalanche approach.
You haven’t maxed out your retirement investments
If you still have room to invest in a 401(k), IRA, or another investment vehicle, consider doing that instead of paying off your mortgage. Well-managed investments typically have a rate of return that exceeds what you’d save by paying off your low-interest home loan. Remember, you can get a loan for a home, car or college tuition but it is more difficult to get a loan to pay for everyday expenses when living retirement.
Consider consulting with a professional financial advisor. An advisor can look at your finances holistically and provide recommendations that are in your best financial interests.
Early mortgage payoff glossary
Accelerated payments refers to any payments made in addition to your scheduled mortgage payments. By making accelerated payments, you can pay off the mortgage faster than by following the lender’s original payment schedule and amount.
Amortization payment schedule
Every mortgage has an amortization payment schedule. This is a table showing the amount of interest and the amount of principal that make up each of your monthly payments.
Early in the loan’s term, a disproportionate amount of the monthly payment goes toward the loan’s interest. Over time this changes, and more of the payment goes toward the principal. The amortization payment schedule shows how each payment is divided.
The remaining balance is the unpaid portion of a loan.
Mortgage interest deduction
The mortgage interest deduction is a tax benefit offered to homeowners on their federal income tax returns. It allows the deduction of home mortgage interest on the first $750,000 (or $375,000 for married couples filing separately) worth of a mortgage. For more insights, checkout common tax deductions for homeowners.
This information is provided for general informational purposes. All transactions are subject to credit approval. Contact a loan officer for a custom quote.