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Early mortgage payoff calculator: Be mortgage-free, sooner

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Updated: April 05, 2024

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You could save money on interest and pay off your mortgage sooner by increasing your monthly mortgage payment. Use this mortgage payoff calculator to see how that works.

Fill in "Additional principal payment" with an extra amount you could pay toward your mortgage each month, then click "Calculate" to see the potential savings and how much faster you'd pay off your mortgage. 

Click the "View Report" button for a detailed look at how a more significant payment shrinks your balance more quickly.

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Early mortgage payoff

Early mortgage payoff calculator

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Use the calculator

How to use the Moneywise.com mortgage payoff calculator

Using a mortgage payoff calculator can significantly assist you in strategizing your mortgage's early payoff, helping you save on interest and potentially shorten the term of your loan. Here’s how to effectively utilize this tool:

  • Gather necessary information: Ensure you have all the required details before you begin, including your original mortgage amount, current interest rate, original loan term, current outstanding balance, and any specific goals for how soon you'd like the mortgage paid off.
  • Input your data: Carefully enter the information into the calculator. Accuracy here is vital to getting valuable results.
  • Adjust the additional principal payment: This is the amount you consider adding to your monthly payment. Experiment with different amounts to see how they affect your loan's payoff timeline and interest savings.
  • Analyze the results: The calculator will provide the new payoff date and how much interest you can save. It might also show you the effect of extra payments on your loan term.

By understanding and applying these steps, you can decide whether paying off your mortgage early fits your financial strategy.

Should you pay it off?

Should you pay off your mortgage?

Paying off your mortgage can be wise if you have sufficient funds and it aligns with your financial goals. It can provide security as it eliminates monthly payments, contributing to your financial freedom, and you could save significant money on interest payments.

However, it's important to weigh factors such as mortgage interest rates, mortgage amortization, potential tax benefits, and your overall financial plan, including investments and retirement goals. Be mindful of mortgage prepayment penalties that some lenders impose. Carefully assess your financial situation to make an informed decision that aligns with your long-term financial goals.

Pros and cons

Pros and cons of paying off your mortgage early

Pros

Pros

  • Interest savings: Paying off your mortgage early can save you thousands of dollars in interest payments over the life of the loan.

  • Financial freedom: Eliminating your mortgage payment frees up monthly cash flow, providing more flexibility in your budget.

  • Increased home equity: Paying off your mortgage means owning 100% of your home's value, which can benefit wealth-building and financial security.

  • Peace of mind: Owning your home outright can provide emotional and financial peace of mind, knowing you have reduced your monthly financial obligations.

Cons

Cons

  • Liquidity concerns: Using a large sum of money to pay off your mortgage can deplete your savings, leaving you with less cash for emergencies or other investment opportunities.

  • Opportunity cost: The money used to pay off your mortgage early could yield a higher return if invested elsewhere, especially in a strong stock market.

  • Loss of tax deductions: Mortgage interest deductions on your taxes will no longer apply once you’ve fully paid off your mortgage, which could result in a higher tax bill for some homeowners.

  • Prepayment penalties: Some mortgages come with prepayment penalties, which could negate some of the financial benefits of paying off your mortgage early.

How to do it

How to pay off a mortgage early?

  • Make extra payments toward your principal each month.
  • Consider refinancing to a shorter loan term or a lower interest rate.
  • Make bi-weekly payments instead of monthly payments.
  • Utilize windfalls such as bonuses or tax refunds toward your mortgage.
  • Explore options like mortgage recast or lump-sum payments to reduce the mortgage balance.
  • Review mortgage terms and seek advice from a financial advisor for personalized guidance.
Why use the calculator?

Why use an extra payment mortgage calculator?

An extra payment mortgage calculator is an invaluable tool for homeowners looking to reduce their mortgage balance more quickly and save on interest payments over the life of their loan. 

By entering details such as your mortgage amount, term, interest rate, and the additional amount you're considering paying each month, the calculator can provide a detailed projection of how these extra payments will affect your mortgage. 

It shows not just the reduction in the term of your mortgage but also the significant interest savings you can achieve. This straightforward tool empowers you to make informed decisions about your finances, illustrating the impact of making regular extra payments towards your principal balance.

Using an extra principal mortgage calculator can help homeowners explore various scenarios to find the right balance between additional payments and their overall financial planning. 

Whether it's a modest increase in monthly payments or lump-sum contributions, the calculator can display how each option accelerates your path to paying off your mortgage and achieving financial freedom. 

It demystifies the process, allowing users to adjust their payment strategies based on their current economic situation and long-term goals. Ultimately, it's a practical resource for anyone seeking to minimize interest expense and own their home outright sooner.

What is the payoff amount

What’s included in the mortgage payoff amount?

The mortgage payoff amount typically includes the remaining principal balance on the loan, any accrued interest up to the payoff date, and any outstanding fees or charges, such as late fees or prepayment penalties.

It may also include any escrow funds the lender holds for taxes and insurance. The exact components of the mortgage payoff amount can vary depending on the terms of your specific loan and the lender's policies. It's important to carefully review your mortgage agreement and consult with your lender to ensure you understand the items included in your mortgage payoff amount before making a final payment.

FAQs

Paying off a mortgage early FAQs

  • What documents should I keep after paying off my mortgage?

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    After paying off your mortgage, it's crucial to keep certain documents for your records, including: mortgage release or satisfaction of mortgage, final mortgage statement, canceled promissory note, payment records and property deed.

  • Is there a penalty for paying off my mortgage early?

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    It depends. Some loans include prepayment penalties that charge you for paying off your mortgage ahead of schedule, especially if the loan is paid off within the first few years. These penalties vary significantly and compensate the lender for the interest payments they'll miss out on. Always review your mortgage contract for prepayment clauses or consult with your lender to understand any potential financial implications of early payoff.

  • At what age should you pay off your mortgage?

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    It depends on individual financial situations, goals, and retirement plans. Some financial advisors suggest paying off your mortgage by retirement to reduce monthly expenses and financial stress during your non-working years.

    However, for others, investing in retirement accounts or other vehicles might take precedence over early mortgage payoff, especially if those investments yield a higher return than the interest rate on the mortgage. It's essential to assess your financial health, future income prospects, and personal preferences when deciding the best time to pay off your mortgage

Tyler Wade Content strategist & writer

Tyler Wade has worked in personal finance for over 5 years writing for brands like Ratehub, Forbes, KOHO, and now Moneywise.com.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.