1. What is a Lump Sum Mortgage Calculator?

Definition: This calculator shows how making a lump sum payment affects your mortgage by calculating the interest saved.

Purpose: It helps homeowners understand the financial benefits of making additional principal payments on their mortgage.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• Original Interest — Total interest paid over the loan term without extra payments
• New Interest — Total interest paid after applying the lump sum payment
• Interest Saved — The difference between original and new interest

Explanation: The calculator first determines the total interest for the original loan, then recalculates with the reduced principal after the lump sum payment.

3. Importance of Lump Sum Payments

Details: Making lump sum payments can significantly reduce the total interest paid and may shorten the loan term, saving you money in the long run.

4. Using the Calculator

Tips: Enter your original loan amount, interest rate, loan term in years, and the lump sum amount you plan to pay. All values must be > 0.

5. Frequently Asked Questions (FAQ)

Q1: How does a lump sum payment affect my monthly payment?
A: Typically, lump sum payments reduce the principal but keep the same monthly payment, allowing you to pay off the loan faster.

Q2: When is the best time to make a lump sum payment?
A: The earlier you make additional payments, the more interest you'll save over the life of the loan.

Q3: Are there penalties for lump sum payments?
A: Some mortgages have prepayment penalties - check your loan terms before making extra payments.

Q4: Should I invest instead of making lump sum payments?
A: This depends on your mortgage rate vs. potential investment returns - consult a financial advisor.

Q5: How accurate is this calculator?
A: It provides a good estimate but doesn't account for potential changes in interest rates or fees.