Prepaying $50,000 on a $280,000 mortgage at 7.5% can save $87,000 in interest or cut 6 years off the term. But a 3% penalty eats $1,500 of that saving. Enter your current balance, rate and prepayment amount to see the net result - shorter term vs lower payment, after penalty.
Prepaying $150000 on Your Loan - Interest Savings
Prepaying $50,000 on a $280,000 mortgage at 7.5% can save $87,000 in interest or cut 6 years off the term. But a 3% penalty eats $1,500 of that saving. Enter your current balance, rate and prepayment amount to see the net result - shorter term vs lower payment, after penalty.
You have $150000 to prepay on your loan. Should you shorten the term or reduce the monthly payment? Prepaying $150000 early in a 25-year mortgage can save tens of thousands in interest. The earlier you prepay, the bigger the savings. Enter your loan details and the calculator will compare both options.
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Paying off your loan early can cost you money - and save you thousands
A $50,000 prepayment on a $280,000 mortgage at 7.5% with 20 years remaining saves $87,412 in interest when you shorten the term. Choose to lower the payment instead: the saving drops to $34,876. And if your lender charges a 3% prepayment penalty, $1,500 disappears before the math even starts. The right choice depends on your rate, your remaining term, and what you need more - time or cash flow.
Balance: $280,000
Rate: 7.5%
Remaining: 240 months
Payment: $2,258/mo
Total interest left: $261,878
New balance: $230,000
Payment: $2,258/mo (unchanged)
New term: 168 months (6 years shorter)
Total interest left: $174,466
Saved: $87,412
How to use this calculator - step by step
- Current loan balance ($) - the remaining principal, not the original loan amount. Check your latest statement or banking app.
- Annual interest rate (%) - your current nominal rate. For variable rates, use today's rate.
- Remaining payments (months) - how many months until full repayment.
- Payment type - fixed (same every month) or declining (decreasing over time).
- Prepayment amount ($) - the lump sum you plan to pay above the regular instalment.
- Prepayment effect - shorten the term (bigger savings) or lower the payment (immediate relief).
- Prepayment penalty (%) - fee charged by the lender, typically 0-3%. Set to 0 if none.
- Read the results - before/after comparison table, interest saved, months shortened or payment reduced.
Rule of thumb: Shortening the term always saves more interest than lowering the payment. A $50,000 prepayment on a $280,000 / 7.5% / 20-year mortgage saves $87,412 when shortening vs $34,876 when lowering. The difference: $52,536.
How prepayment size affects savings
Reference scenario: $300,000 balance, 7% rate, 25 years remaining, fixed payments, shorten term, no penalty.
| Prepayment | Interest saved | Term shortened | Savings per $1 prepaid |
|---|---|---|---|
| $10,000 | $21,407 | 18 months | $2.14 |
| $25,000 | $48,218 | 39 months | $1.93 |
| $50,000 | $82,954 | 68 months | $1.66 |
| $100,000 | $135,892 | 117 months | $1.36 |
The marginal return decreases as the prepayment grows - the first $10,000 saves $2.14 per dollar, while the $100,000 level averages $1.36. Early, smaller prepayments are proportionally more efficient.
Practical examples
$200,000 balance, 6.5%, 180 months left, $30,000 prepayment, shorten term - saves $37,891 in interest and cuts 38 months (over 3 years) off the loan. The payment stays at $1,742/month.
Same loan, lower payment instead - the payment drops from $1,742 to $1,482 (saving $260/month), but total interest saved is only $15,647. The term stays at 180 months.
$400,000 balance, 8%, 300 months left, $80,000 prepayment, 2% penalty, shorten term - gross saving: $194,712. Penalty: $1,600. Net saving: $193,112. Term shortened by 93 months (nearly 8 years). The penalty is negligible relative to the interest saved.
$50,000 personal loan, 11%, 48 months left, $15,000 prepayment, shorten term - saves $5,238 in interest. Term drops from 48 to 31 months. On a smaller, shorter loan, the savings are proportionally smaller but still meaningful.
$150,000 balance, 3.5%, 240 months left, $40,000 prepayment, shorten term - saves $22,416 and cuts 72 months. At low rates, prepayment still helps - but the savings per dollar prepaid are smaller than at higher rates. Consider whether investing the $40,000 at a higher return is a better use of capital.
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Reviewed by: Natalia Skrzek