You will not immediately feel the impact of your extra repayments, but doing the math will help you see how much you can actually save. Paying extra on your mortgage will help you save in the long run. Is it worth it to pay extra on your mortgage? Try to play with your numbers using the calculator here. Take note, however, that Your Mortgage's Extra & Lump Sum Payment Calculator assumes that the interest rates remain the same throughout the loan term period. Furthermore, you would be able to trim down your loan term by one year and seven months. If you added a lump sum of $10,000 by the sixth year of your loan term, the overall savings would be $18,600. For instance, if you started paying an additional $100 on the fifth year of your loan, you would save roughly $10,300 and finish your mortgage one year early. ![]() ![]() You will get to reduce interest charges if you start paying extra earlier. With the additional lump sum payment, you will be able to save as much as $9,600 and reduce your loan term by as much as one year and one month. How will these affect the interest and your loan term? This is on top of the $100 regular payments you started making by the 10th year. However, using the same figures above, let us say you made a lump sum payment of around $10,000 by the 15th year of your loan term. You will also finish paying off your home loan eight months early. Given the situation above, you will be able to save around $5,600 in interest charges. How much will you be able to save in the long run? In the 10th year of your loan, you decided to add $100 extra on your monthly repayments until the end of your loan term. ![]() To illustrate how much you can save when you pay regular extra repayments, here is a sample computation using Your Mortgage's Extra & Lump Sum Payment Calculator:įor this example, let us say you have a $560,000 loan with a loan term of 25 years and an interest rate of 3.25%. How much can you save by making extra repayments? As mentioned earlier, these additional payments allow you to reduce the interest charged to your loan. However, extra repayments cut the overall costs you have to pay. If you are planning to have a repayment holiday, you should discuss with your bank the possible options available for you. Take note that extra repayments are not considered advanced payments and will not serve as a "buffer" that will allow you to skip repayments in the future. Does your mortgage payment go down if you pay extra?Ī frequent misconception about extra repayments is that they lower regular repayments in the future. Making extra repayments during the early part of your loan term will help you maximise the savings this loan feature can provide. Given that loan charges are based on the principal amount of your loan, reducing it in the shortest possible time also trims down the accumulated interest. These additional payments directly pay down the principal part of your home loan. They may come in two forms: regular additional payments and a lump-sum payment. How do extra repayments work?Įxtra repayments are additional funds that you pay on top of your regular repayments. Here are the things you should know about extra repayments and how you can maximise them to save both time and money in the long run. ![]() An average borrower will take anywhere from 25 to 30 years to finish paying off their mortgages, but paying extra can shorten the time required to settle the loan by a months or even a year or two. One of the most sure-fire ways to save on interest charges and reduce your loan term is by making extra repayments on your loan.
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