Instead of making extra or lump sum payments, you could consider having a mortgage with an offset account instead.Īn offset account is a transaction account attached to your mortgage where you can deposit money. An offset account is an alternative to making extra or lump sum payments Considering that interest is charged daily, making more frequent repayments can reduce the interest paid overall. While most mortgages are set to monthly repayment frequencies, you could adjust the repayment cycle to weekly or fortnightly. But if this isn’t workable into your budget, making extra repayments each month or frequently - no matter how big or small - can reap a cost-saving benefit. That being said, making a lump sum will instantly shave off a significant portion of the principal amount, which goes on to reduce the loan term and total amount of interest owed. Contributing a lump sum towards to end of your loan term would mean you already paid a fair amount of interest towards the loan.Īs soon as you have any funds that you plan to filter into the loan, you should take action - as the earlier in the loan term you are able to do this, the more beneficial it will be to your savings.

This is because it can take time to save money. However, it’s not advisable to put money aside in the hopes of one day making a large lump sum payment. Whether you can contribute one larger lump sum or extra repayments over time will depend on you. What is more effective: A larger lump sum or extra payments? An extra $10,000 will be contributed in the sixth month of your loan term.įrom this information, the calculator shows that your 30-year loan term will reduce by two years and two months, and you’d save a total of $62.438 in interest - a huge amount considering the small outlay. over a 30-year loan term.Īdditional repayments will be made on top of your standard monthly repayment of $100 each month. Let’s say you have an $800,000 home loan with a 4.5% interest rate p.a. To help you understand how extra and lump sum payments can impact the total amount you will need to repay on your home loan, here is an example provided by the calculator. This information will include the principal amount from the home loan, the annual interest rate, additional repayment amount each month when additional repayments will start, and any lump sum payment to be made throughout the life of the loan. Your Mortgage’s Extra and Lump Sum Calculator will ask you to provide a few important pieces of information for it to perform its number-crunch. How the extra and lump sum calculator works In the meantime, for those wanting to find out how much additional payments can impact their home loan and determine its final amount - as well as the principal and interest rate fees that are included - Your Mortgage’s Extra and Lump Sum Calculator can be insightful on this front.Īll you need to do is have some information handy and the calculator will do the rest. Alternatively, you could discuss with a financial adviser, accountant, or mortgage broker to decide which repayment strategy will be best suited to you. With this in mind, it could be worth checking the terms and conditions attached to your mortgage before deciding whether making extra and lump sum payments will work in your favour. Most notably, lookout for a ‘break fee’, which is generally only charged if you pay down your fixed-rate (rather than a variable rate) home loan earlier than expected. Since the amount of interest is based on the principal, the lower this amount is, the lower the interest charges.ĭespite these benefits, it’s important to note the drawbacks of making extra payments. Think of it this way: extra repayments directly pay down the principal amount owing on your home loan (the amount of money you borrowed). Different terms, fees or other loan amounts might result in a different comparison rate.

Warning: this comparison rate is true only for this example and may not include all fees and charges. *The Comparison rate is based on a $150,000 loan over 25 years. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you.

All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%.

Mortgage calculator extra payments