Mortgage Prepayment Calculator — Lump-Sum Early Payment Impact
Enter your remaining balance, rate, time left on the loan and a lump-sum amount. Choose whether you want to shorten the term (keeping the same monthly payment) or lower the payment (keeping the same term) — the calculator shows interest saved in either case.
%
Effect of prepayment
3 yr 11 mo earlier payoff
- 1
New balance after lump sum
280,000 − 20,000 = 260,000 - 2
Original monthly payment
280,000 × 0.005417 × 5.0562 ÷ (5.0562 − 1) = 1,890.58 - 3
New payoff term (months)
−ln(1 − 0.744921) ÷ ln(1 + 0.005417) = 253Same payment applied to the reduced balance retires the loan sooner. - 4
Months saved
300 − 253 = 47
How does this calculator work?
A lump sum L applied to principal drops your balance to B − L. Re-amortising at the same payment shortens the term by −ln(1 − r(B−L)/PMT)/ln(1+r) months; re-amortising at the same term lowers the payment. Either way, the interest saved equals the reduction in total amortisation cost — often many times the lump sum itself.
Formula
How this is calculated
A lump-sum prepayment is applied directly to the outstanding principal, immediately reducing the balance the lender will charge interest on. Because mortgage interest compounds monthly on the remaining balance, any reduction in principal has a compounding benefit — every future month accrues less interest, which also means more of each regular payment goes to principal, creating a snowball effect.
After applying the lump sum, there are two standard options. Keeping the same monthly payment and shortening the term: the lower balance means the existing payment now overpays the interest charge faster, so the loan is retired earlier — the new term is found by solving the amortisation formula for n. Keeping the same term and reducing the payment: the lender recalculates the amortisation payment for the new, smaller balance — the new payment is found directly from the formula.
The interest saved is the difference between the original total interest (original payment × original months − original balance) and the new total interest (new payment × new months − new balance after prepayment). Lump-sum overpayments are subject to the same penalty-free caps as extra monthly payments on some fixed-rate deals — check your contract.
Frequently asked questions
Shortening the term saves exactly the same interest as lowering the payment when both start from the same new balance. The difference is cash-flow: if you keep the same payment you clear the debt faster; if you reduce it you have more money each month but pay over the original timeframe.
The earlier in the loan life the better, because interest accrues on the full balance for the fewest remaining months. A prepayment in month 1 saves far more than the same amount applied in month 300, because early on the balance is high and interest is a large share of each payment.
Not always — it depends on your lender and country. Some lenders reduce the payment and keep the same term; others shorten the term and keep the same payment; some require you to request a re-amortisation. Clarify with your lender which option is applied by default.
Also known as
TG we-Calculate Editorial Team. (2026). Mortgage Prepayment Calculator — Lump-Sum Early Payment Impact [Online calculator]. TG we-Calculate. https://we-calculate.com/calculator/mortgage-prepayment-calculator
TG we-Calculate Editorial Team. "Mortgage Prepayment Calculator — Lump-Sum Early Payment Impact." TG we-Calculate. 2026. https://we-calculate.com/calculator/mortgage-prepayment-calculator.
TG we-Calculate Editorial Team, "Mortgage Prepayment Calculator — Lump-Sum Early Payment Impact," TG we-Calculate, 2026. [Online]. Available: https://we-calculate.com/calculator/mortgage-prepayment-calculator
@misc{wecalculate_mortgage_prepayment_calculator, title = {Mortgage Prepayment Calculator — Lump-Sum Early Payment Impact}, author = {{TG we-Calculate Editorial Team}}, howpublished = {\url{https://we-calculate.com/calculator/mortgage-prepayment-calculator}}, year = {2026}, note = {TG we-Calculate} }
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