Loan Prepayment Calculator — Interest Saved, Months Shortened, Invest vs Prepay

Real-world use cases

• Got a 100k bonus and a 4.2% mortgage — pay it down or park it?

  You just received a 100,000 year-end bonus and your mortgage sits at 4.2% with 18 years left. Drop the lump sum in shorten-term mode and the calculator shows roughly 95,000 in interest saved and about 2.5 years cut off the term. Then set the invest rate to 3% (a realistic locked deposit) and the breakeven panel confirms prepaying wins. Bump it to 8% and the verdict flips, so you decide with numbers, not a gut feeling.

• Income dropped after a job change and the monthly payment hurts

  Your salary fell 30% after switching jobs and the 8,200 monthly payment now eats too much of your paycheck. You have 150,000 in savings. Run the one-time-lump-sum lower-payment mode: the same end date stays, but the monthly drops to around 6,900, freeing up 1,300 every month for the rest of the term. The interest saved is smaller than shorten-term, but the cash-flow relief is exactly what this situation needs.

• Auto-deduct an extra 2,000 each month to be mortgage-free a decade early

  On a 1,000,000 / 30-year / 4% equal-payment loan you set up an extra 2,000 principal payment every month from year one. The calculator shows roughly 180,000 in total interest saved and the term shortened by about 9 years. You see the first-24-month side-by-side so you know exactly how much faster the balance falls, then you set a standing transfer at the bank and forget about it.

• Deciding between equal-payment and equal-principal before signing

  You are about to sign a 1,000,000 / 30-year / 4% mortgage and the bank offers both repayment styles. Run the calculator once as equal-payment and once as equal-principal: total interest differs by about 116,000, but the equal-principal month-1 payment is roughly 30% higher. Seeing both numbers side by side, you pick equal-principal because your early-career cash flow can absorb the higher start and you want the lower lifetime cost.

Common pitfalls

• Forgetting to subtract months already paid — entering a 360-month term when you've paid 60 makes the calculator price interest on payments you've already made, overstating savings. Always fill in months paid.

• Comparing prepayment savings to a stock-market return you can't guarantee. Prepaying is risk-free at your loan rate; only beat it with an investment you'd actually hold for 20 years, like a 5% locked deposit, not a hoped-for 10%.

• Defaulting to lower-payment mode when your goal is to save the most interest. Lower-payment keeps the end date, so it saves far less than shorten-term — pick shorten-term unless you specifically need monthly cash-flow relief.

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