Mortgage Prepayment Calculator

Analyze mortgage prepayment strategies with comprehensive ROI analysis, investment comparisons, and tax implications. Optimize your payoff strategy.

Current Mortgage Details

Current Loan Balance ($) Interest Rate (%) Remaining Term (years) Current Monthly Payment ($) Leave blank to auto-calculate

Prepayment Strategy

Prepayment Type

Extra Monthly Principal ($)

Investment Analysis

Alternative Investment Return (%) Expected annual return if investing instead of prepaying Investment Risk Level Tax Bracket (%) For mortgage interest deduction analysis

Analysis Options

Include tax implications analysis Show opportunity cost comparison Include risk assessment Calculate break-even scenarios

Enter mortgage details and prepayment strategy to analyze.

How it works

This calculator analyzes mortgage prepayment strategies by comparing different payment methods against investment alternatives. It considers opportunity costs, tax implications, and risk factors to help optimize your financial strategy.

Example

$250K balance at 5.5% with 25 years remaining: Adding $300/month saves $47,000 in interest and pays off 5.2 years early, providing an effective 5.5% guaranteed return.

FAQ

Should I prepay my mortgage or invest the money?

Compare your mortgage rate to expected investment returns. Prepayment provides a guaranteed return equal to your mortgage rate, while investments offer potentially higher but riskier returns. Consider your risk tolerance and tax situation.

What's the most effective prepayment strategy?

Monthly extra principal payments typically provide the most savings, followed by annual lump sums. Biweekly payments are automatic but less flexible. The best strategy depends on your cash flow and financial discipline.

How do taxes affect prepayment decisions?

Mortgage interest is tax-deductible, reducing the effective cost of your mortgage. If you're in a high tax bracket, the after-tax cost of your mortgage may be lower than potential investment returns, favoring investment over prepayment.

What are the risks of mortgage prepayment?

Prepayment reduces liquidity and opportunity for higher returns. You lose access to cash that could earn more elsewhere or handle emergencies. Consider maintaining adequate liquid savings before aggressive prepayment.

When should I avoid mortgage prepayment?

Avoid prepayment if you have higher-interest debt, inadequate emergency funds, or can earn significantly more investing. Also consider if you're near retirement and need liquidity, or if mortgage rates are very low.