Mortgage Prepayment Calculator

Deciding whether to pay off your mortgage early comes down to comparing your mortgage rate with your expected investment return:

• If investment return > mortgage rate: keeping cash invested may earn more than you save in interest.
• If investment return < mortgage rate: prepaying is like earning a guaranteed return equal to your mortgage rate.
• If they're about equal: consider liquidity needs and psychological comfort.

Enter your expected investment return below to compare prepaying vs investing the extra payment.

1. Prepayment Penalties & Minimums

Some lenders charge prepayment penalties or require a minimum extra payment. Check your loan agreement for any fees, especially in the first 1-3 years. Many US mortgages (conventional/FHA/VA) allow penalty-free prepayment.

2. Liquidity & Opportunity Cost

Once extra cash goes into your home equity, it's not liquid. Make sure you keep an emergency fund (3-6 months of expenses) before redirecting cash to mortgage prepayment.

3. Extra Payment Methods

• Monthly extra: add a fixed amount to each payment - simplest and most consistent.
• Bi-weekly payments: half-payment every 2 weeks = 13 monthly payments per year.
• Lump sum: apply bonuses, tax refunds, or windfalls once or twice a year.
• Round up: round your payment up to the nearest $50 or $100.

4. When Prepaying May Not Make Sense

• Low fixed mortgage rate (< 4%) while high-yield savings or investments earn more.
• Behind on retirement contributions or lacking emergency savings.
• High-interest debt (credit cards, personal loans) - pay those first.
• Planning to move within a few years - extra payments won't compound much benefit.