See the powerful impact of a one-time payment. Our lump payment mortgage calculator shows you exactly how much interest and time you can save by making a single lump sum principal payment today.
Lump Sum Payment Calculator
lump payment mortgage calculator Formula
This calculator uses a comparative amortization method. It calculates your total costs under your current schedule and compares them to a new schedule where the principal is immediately reduced by the lump sum amount.
Interest Saved = Total Interest (Original) – Total Interest (New)
Variables
- Current Balance: What you owe today.
- Lump Sum: A one-time cash infusion (e.g., tax refund, bonus, inheritance).
- Interest Savings: The amount of money you won’t have to pay the bank because you lowered the principal early.
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What is a Lump Payment Mortgage Calculator?
A lump payment mortgage calculator is designed for borrowers who find themselves with a windfall of cash—such as a work bonus, tax refund, or inheritance—and want to know if they should apply it to their mortgage.
Applying a lump sum to your principal does not lower your monthly payment (unless you “recast” the loan), but it significantly shortens the loan term and eliminates future interest on that principal amount.
How to Calculate Lump Sum Savings (Example)
- Define Mortgage: $200,000 balance, 6% rate, 25 years left.
- Monthly Payment: The calculator finds you are paying ~$1,288/mo.
- Apply Lump Sum: You pay $10,000 extra today. Balance drops to $190,000.
- Result: You continue paying $1,288/mo, but since the balance is lower, more goes to principal. You might save $18,000+ in interest and finish 2 years early.
Frequently Asked Questions (FAQ)
Generally, no. On a fixed-rate mortgage, your required monthly payment stays the same, but you pay off the loan sooner. To lower the monthly payment, you must ask your lender to “recast” the loan.
Most modern loans do not have prepayment penalties, but it is always smart to call your servicer and verify before sending a large check.
The earlier, the better. Because interest is calculated on your outstanding balance, reducing that balance early in the loan term compounds your savings the most.
Compare your mortgage interest rate (a guaranteed return of saving 6-7%) versus potential investment returns (variable 7-10%). Also consider your tax situation and risk tolerance.