Mortgage Payoff Calculator
See how much interest you save and how much sooner you clear the mortgage by paying extra principal each month on top of the normal instalment.
Input Data
Results
At a glance:Paying extra principal each month shortens a mortgage and cuts interest. The model amortises the balance monthly with the normal payment plus an extra amount applied to principal, then compares the new total interest and payoff time with the original plan. Interest saved = original total interest − new total interest; months saved = original months − new payoff months.
Formula
Normal payment from standard amortisation of balance at the annual rate.
Each month apply normal payment + extra to principal; interest accrues on the falling balance.
Interest saved = original total interest − new total interest; months saved = original months − new payoff months.
$$\text{PMT} = \dfrac{P \times r}{1 - (1+r)^{-n}}, \quad r = \dfrac{\text{annual rate}}{12}$$$$\text{Principal Paid}_t = \text{PMT} + \text{Extra} - \text{Balance}_{t-1} \times r$$How to Use
- Enter the current loan balance and annual rate.
- Enter the remaining term and the extra monthly amount.
- Read the interest saved and how much sooner you pay off.
FAQ
Why does an extra payment save so much interest?
The extra payment reduces the principal 100%, shrinking the balance on which future interest (balance × monthly rate) is charged, so the principal is repaid faster and the effect snowballs. The earlier and larger the extra payment, the bigger the saving, because early on the balance is large and interest is a high share of the instalment.
Is there a prepayment penalty in Hong Kong?
Most Hong Kong mortgages have a penalty period in the first 2–3 years, during which partial early repayment or full redemption may incur a penalty or administrative fee. Check the loan contract before acting, or make the larger extra payments only after the penalty period ends.
Should I pay off early or invest the money?
It depends on your mortgage rate versus the return you can reliably earn. If the mortgage rate is higher than a safe expected investment return, early repayment is better value; if you can steadily earn more than the mortgage rate, keeping the cash invested may do better. Also weigh your risk tolerance and cash-flow needs.
Does the extra payment shorten the term or lower the monthly payment — what is the difference?
When you ask the bank for a partial early repayment (an extra lump of principal), it usually offers two treatments with very different savings, so confirm with the bank before choosing. The first is 'shorten the term, keep the monthly payment the same': your extra principal directly lowers the balance but the monthly instalment stays as before, so the same payment clears the balance sooner and the term shortens. This saves the most interest, because you keep repaying at the original intensity. This calculator's 'extra monthly payment' model is close to this effect (payment plus extra together hit the principal, faster and faster). The second is 'lower the monthly payment, keep the term the same': after the extra principal, the bank recomputes a lower monthly payment to the original maturity, easing your monthly burden but leaving the term unchanged. This also cuts total interest (less principal) but usually by less than the first, because you spend the saved payment room on lowering the monthly load rather than accelerating repayment. In short: pick 'shorten the term' to save the most interest and get debt-free fastest; pick 'lower the monthly payment' to ease cash flow. Note not all banks or plans offer both options — some default to one, some require you to apply, and some limit the frequency, amount or timing (e.g. penalty period) of partial prepayments. Before extra repayment, ask the bank whether partial prepayment is allowed, how it will be handled, and whether any penalty or fee applies, then plan accordingly.
In Hong Kong, is early mortgage payoff penalised, and by how much?
In Hong Kong, early payoff 'may' be penalised, depending on whether you are still within the mortgage's penalty period and the loan contract terms. The penalty period is typically the first 2–3 years after the loan is drawn. Banks set it because they often offer a cash rebate to attract the mortgage and expect you to pay for a while to recoup it; if you fully redeem or make a large partial repayment within the penalty period, they charge a penalty to recover some cost. Common penalty methods: one, returning a proportion (or even all) of the cash rebate already received; two, charging a percentage of the early-repaid amount or the loan. Even after the penalty period, some banks still regulate partial prepayment — e.g. an annual cap on the prepayable proportion, a minimum amount per repayment, required notice days, or a small administrative fee. So before acting: first, check your mortgage contract for when the penalty period ends and how the penalty is computed; second, ask the bank directly whether early repayment (partial or full) in your situation triggers a penalty or fee and how much; third, count the possible penalty into the cost and compare it with the interest you would save — within the penalty period the penalty may offset or even exceed the saving, so it is usually better to wait until it ends before adding large extra payments. In short: after the penalty period ends, early repayment is generally not penalised and the saved interest is pure gain; within the penalty period, compute the penalty first and decide if it is worth it.
Related Tools
References
Content review: Calculatorism Finance Team. Results are for reference only; please refer to the relevant authorities for the official figures.