Finance category
Mortgage, loan, investing, tax, and money calculators.
Principal Curtailment Calculator
An extra principal payment is one of the highest-ROI financial moves — every dollar prepaid effectively 'earns' the mortgage interest rate, tax-free. This calculator models how a lump-sum prepay or recurring extra payment changes your loan.
Lifetime interest saved
$87,005
Months cut off term
6 yr
New term
20 yr
New total interest
$208,495
Baseline total interest
$295,499
Base monthly P&I
$1,829
How the math works
$275K balance at 6.5% with 312 months remaining: regular payoff would cost $331K in interest. Adding a $10K lump sum + $150/mo extra: cuts 60-75 months off the term and saves ~$85K in interest.
Compare this to after-tax bond returns. Against 4.5% taxable bonds (~3% after federal tax), a 6.5% mortgage is a clear winner to prepay for most households outside the top tax brackets.
How to Use
- Enter current balance, interest rate, and remaining months.
- Enter one-time curtailment amount and/or recurring extra monthly payment.
- See new payoff date, interest saved, and break-even on the prepay.
Frequently Asked Questions
Is prepaying a mortgage a good idea?
If your rate > risk-free return (e.g., mortgage 6.75% vs T-bills 4.5%), prepaying beats savings. If rate < safe return (e.g., locked-in 3% mortgage vs 5% savings), keep the mortgage. Also weigh liquidity — prepaid money is locked in the house.
Does a one-time lump sum help much?
Hugely. A $10K lump sum on a $300K 6.75% 30-yr mortgage at year 5 saves $19K in interest and cuts 8 months off the term. The effective return on the $10K: 6.75% tax-free, compounded.
Recurring vs lump sum?
Recurring (biweekly / extra $X each month) compounds steadily. Lump sum is a one-time hit but concentrated. For most borrowers: $100-$200/mo extra is more sustainable than a $20K lump sum. Both work.
When should I NOT prepay?
If your rate is below current risk-free return. If you're not maxed in tax-advantaged retirement accounts. If you lack an emergency fund. If there's a better use of funds (paying off high-rate consumer debt).
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