Mortgage Prepayment Penalty Calculator
Evaluate the penalty for paying off your home loan early versus continuing monthly payments.
Additional Information and Definitions
Original Loan Balance
Your current mortgage principal balance. This should reflect how much you still owe.
Annual Interest Rate (%)
Your current loan's annual interest rate. E.g. 6 means 6%.
Months Remaining
How many months left until your loan would naturally be fully paid.
Penalty Method
Select how your mortgage penalty is determined: 3 months interest, IRD, or whichever is higher.
Rate Difference (IRD) (%)
If using IRD method, difference between your old rate and new current rate. E.g. if you have 6% but new rates are 4%, difference is 2.
IRD Penalty Months
Number of months used to calculate IRD-based penalty. Often 6-12 months in some regions.
Early Payoff or Keep Paying?
Find out how much you might save over the next 12 months.
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Prepayment Penalty Terms
Understand key concepts behind mortgage early payoff costs:
3-Months Interest Penalty:
A simple penalty equal to three months of interest. Often used by lenders as a standard minor penalty. It helps them recoup some lost revenue.
Interest Rate Differential (IRD):
A method that compares your loan's rate to current rates. The penalty covers the lender's potential losses for remaining months.
Months Remaining:
The total number of months left on your mortgage if you continue regular payments. It's used in calculating potential interest costs.
Penalty Months:
Used in the IRD formula to determine how many months of difference in interest should be charged as a penalty to you.
5 Surprising Facts About Paying Off Mortgages Early
When does it make sense to pay off a mortgage ahead of schedule? Here are some lesser-known tidbits.
1.Your Credit Score Might Temporarily Dip
Paying off a large debt can lead to a short-term decrease in your credit utilization, but it recovers quickly once everything updates.
2.Some Lenders Waive IRD on Special Occasions
A few lenders have holiday or promotional windows where they reduce or waive IRD penalties if you meet certain conditions.
3.Mortgage 'Shortening' Beats Refinancing Sometimes
Instead of a refinance, simply paying a lump sum or making bigger payments could save more interest if your existing rate is already favourable.
4.Psychological Benefits are Real
Homeowners often report feeling less stress when they're free of mortgage debt, even if the math doesn't always show huge savings.
5.Ask About Porting the Mortgage
In some regions, you can 'port' your existing mortgage to a new home, preserving your current rate and terms, thus avoiding penalties entirely.