Additional Lump Sum Payment Mortgage Calculator
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Additional Lump Sum Payment Mortgage Calculator
Your Savings
Enter values above to see your results.
Understanding the Impact of Additional Mortgage Payments
Paying off your mortgage faster can be a significant financial goal. While making your regular monthly payments is essential, strategically applying additional funds, such as a lump sum payment, can dramatically alter the life of your loan. This calculator helps you visualize the potential savings in interest and the reduction in your loan term when you make an extra payment.
How the Calculator Works
The calculator uses your current mortgage details and a proposed lump sum payment to estimate the impact on your loan's interest and duration. Here's a breakdown of the core calculations:
1. Calculating the Original Monthly Payment (P&I)
First, we determine the original monthly principal and interest (P&I) payment. This is crucial because the lump sum doesn't change your required monthly payment; it reduces the principal balance directly, which then affects future interest accrual.
The standard formula for monthly mortgage payment is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Your total monthly mortgage payment (Principal and Interest)
- P = The principal loan amount
- i = Your monthly interest rate (annual rate divided by 12)
- n = Total number of payments (loan term in years multiplied by 12)
2. Calculating the Total Interest Paid Without Lump Sum
We calculate the total interest you would pay over the remaining life of the loan if you only make the scheduled payments.
Total Interest = (Monthly Payment * Remaining Loan Term in Months) – Original Loan Balance
Note: For this calculator, we use the provided 'Remaining Months on Loan' to estimate the future payments based on the current balance and rate.
3. Calculating the New Loan Balance After Lump Sum
The lump sum payment is directly subtracted from the current mortgage balance:
New Principal Balance = Current Mortgage Balance – Lump Sum Payment
4. Calculating the New Loan Term and Total Interest Saved
Using the new, reduced principal balance, the original interest rate, and the original monthly payment (M), we can recalculate the number of months it will take to pay off the loan.
The formula to find the new number of months (n_new) is derived from the monthly payment formula:
n_new = -log(1 – (P_new * i) / M) / log(1 + i)
Where:
- P_new = New Principal Balance after lump sum
- i = Monthly interest rate
- M = Original Monthly Payment (calculated earlier)
Once we have n_new, we can calculate:
- New Total Interest Paid = (M * n_new) – P_new
- Interest Saved = Total Interest Paid (Without Lump Sum) – New Total Interest Paid
- Months Saved = Remaining Months on Loan – n_new
When is a Lump Sum Payment Most Effective?
Lump sum payments are generally most impactful when:
- Applied early in the loan term: More of your early payments go towards principal, so reducing the principal early has a greater effect on long-term interest savings.
- The interest rate is high: Higher interest rates mean more of your payment goes to interest, so reducing the principal faster saves you more money.
- The lump sum is substantial: A larger payment will naturally have a bigger impact on reducing the balance and, consequently, the interest paid and the loan term.
Making additional payments is a powerful way to build equity faster and save a significant amount of money over the life of your mortgage. Use this calculator to see the potential benefits for your specific situation.
function calculateMortgage() {
var principal = parseFloat(document.getElementById("principal").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var remainingMonths = parseInt(document.getElementById("remainingMonths").value);
var lumpSum = parseFloat(document.getElementById("lumpSum").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(principal) || isNaN(interestRate) || isNaN(remainingMonths) || isNaN(lumpSum) ||
principal <= 0 || interestRate < 0 || remainingMonths <= 0 || lumpSum < 0) {
resultDiv.innerHTML = "Please enter valid positive numbers for all fields.";
return;
}
var monthlyInterestRate = interestRate / 100 / 12;
// — Calculate Original Monthly Payment (P&I) —
// Using the formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
var originalMonthlyPayment;
if (monthlyInterestRate === 0) {
originalMonthlyPayment = principal / remainingMonths;
} else {
originalMonthlyPayment = principal * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, remainingMonths)) / (Math.pow(1 + monthlyInterestRate, remainingMonths) – 1);
}
// — Calculate Total Interest Paid Without Lump Sum —
var totalInterestWithoutLumpSum = (originalMonthlyPayment * remainingMonths) – principal;
// — Calculate New Principal Balance After Lump Sum —
var newPrincipalBalance = principal – lumpSum;
if (newPrincipalBalance <= 0) {
resultDiv.innerHTML = "
Congratulations! Your lump sum payment fully paid off your mortgage.
";
return;
}
// — Calculate New Loan Term and Total Interest Saved —
// Using the formula to find n_new: n_new = -log(1 – (P_new * i) / M) / log(1 + i)
var newRemainingMonths;
if (monthlyInterestRate === 0) {
newRemainingMonths = newPrincipalBalance / originalMonthlyPayment;
} else {
// Check if the new payment is enough to cover the interest
if (originalMonthlyPayment <= newPrincipalBalance * monthlyInterestRate) {
resultDiv.innerHTML = "Your regular monthly payment is not enough to cover the interest on the reduced balance. Please increase the monthly payment or lump sum.";
return;
}
newRemainingMonths = -Math.log(1 – (newPrincipalBalance * monthlyInterestRate) / originalMonthlyPayment) / Math.log(1 + monthlyInterestRate);
}
// Rounding the new remaining months to the nearest whole number for display
var roundedNewRemainingMonths = Math.round(newRemainingMonths);
if (roundedNewRemainingMonths < 0) roundedNewRemainingMonths = 0; // Ensure not negative
var newTotalInterestPaid = (originalMonthlyPayment * newRemainingMonths) – newPrincipalBalance;
if (newTotalInterestPaid < 0) newTotalInterestPaid = 0; // Ensure not negative
var interestSaved = totalInterestWithoutLumpSum – newTotalInterestPaid;
var monthsSaved = remainingMonths – roundedNewRemainingMonths;
// Format results for display
var formattedInterestSaved = interestSaved.toLocaleString(undefined, { minimumFractionDigits: 2, maximumFractionDigits: 2 });
var formattedMonthsSaved = monthsSaved.toString(); // No need to format if it's just a count
var formattedNewRemainingMonths = roundedNewRemainingMonths.toString();
resultDiv.innerHTML = `
$${formattedInterestSaved}
You could save an estimated
$${formattedInterestSaved} in interest and pay off your mortgage approximately
${formattedMonthsSaved} months sooner.
Your loan would be paid off in about
${formattedNewRemainingMonths} months.
`;
}