Loan Prepayment Savings Calculator
Most US Qualified Mortgages issued after 2014 prohibit prepayment penalties. Some non-QM loans charge 1–3% in the first 1–3 years.
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How to use
- 1 Enter remaining loan balance and how much you want to prepay (lump sum or extra principal).
- 2 Enter the loan APR (mortgage 6.30%, auto 7-10%, personal 10-20%, student 5-7%).
- 3 Enter remaining months on the loan (loan term × 12 - months already paid).
- 4 Enter prepayment penalty rate if any. Most US mortgages: 0% under QM (after year 3). Some non-QM or older loans: 1-3%. Auto/personal/student loans federally regulated: 0%.
- 5 Enter alternative return % (S&P 500 historical 10%, conservative bond ~5%, savings ~4.5%). Click Calculate to see net profit/loss vs investing the same money.
About Loan Prepayment Savings Calculator
FAQ
Q Are there prepayment penalties on US loans?
Mostly NO. Federal Qualified Mortgage (QM) rules cap penalties at 2% in years 1-2, 1% year 3, and ZERO after year 3. FHA/VA/USDA loans: 0% always. Auto/personal/student loans: 0% under TILA. Non-QM mortgages and SBA business loans may still charge penalties — check documents.
Q Should I pay off my mortgage early?
Depends on math. Mortgage at 6.30% (after-tax ~5%) vs S&P 500 historical 10%: usually INVEST instead. EXCEPTION: if rate is 7%+ or you're close to retirement and want guaranteed peace of mind. Always max 401(k) match + HSA + Roth before extra mortgage.
Q How does prepayment save interest?
Each $1 prepaid principal eliminates the interest that would have accrued on it for remaining term. Example: $10,000 prepayment on 6.30% mortgage with 25 years remaining saves $10K × 0.063 × 25 ≈ $15,750 in future interest. Compounded benefit on amortization tables.
Q What is the opportunity cost of prepayment?
Money used for prepayment is NOT in the stock market. If your mortgage is 6.30% and S&P 500 averages 10%, you're GIVING UP 3.7%/yr returns. Over 25 years, $10,000 invested at 10% becomes $108,000 vs paying off $10K of 6.30% loan saves $25K in interest — invest wins.
Q Should I prepay credit card debt?
YES — always. Credit card APR averages 22% in 2026. No investment safely returns 22%. Pay off all credit cards before any other prepayment, investment, or even retirement match in extreme cases. Avalanche method (highest APR first) saves the most.
Q Does prepayment hurt my credit?
NO. Prepayment maintains or improves credit score by lowering your debt-to-income ratio and reducing utilization. Closing the account after payoff CAN slightly reduce credit score (mix + age) — but most prepayments don't close the account, they just reduce balance.
Q How much can biweekly payments save?
Significant. Biweekly = 26 half-payments per year = effectively 13 monthly payments (vs 12). Pays a 30-year mortgage in about 24 years. Saves 6+ years of interest. Most lenders allow it free; some charge a setup fee — DIY by adding 1/12 extra to each monthly payment.
Q Are prepayment penalties tax deductible?
For mortgages: PARTIALLY. Penalties on home mortgages may be deductible as mortgage interest if itemizing AND the loan is on your primary residence. Cannot deduct on investment property loans (capitalize instead). Cannot deduct on other consumer loans. Most filers take standard deduction now ($16,100/$32,200) — irrelevant.
Official resources
CFPB — Ability to Repay/Qualified Mortgage Rule
Consumer Financial Protection Bureau official QM rule including 2%/1%/0% prepayment penalty caps.
CFPB — Truth in Lending Act (TILA)
CFPB Regulation Z implementing TILA — prepayment penalty disclosure and limits.
IRS Topic 504 — Home Mortgage Points
IRS guidance on deductibility of mortgage prepayment penalties as home mortgage interest.
Freddie Mac PMMS — Mortgage Rates
Weekly Freddie Mac Primary Mortgage Market Survey — 30-year and 15-year fixed rates.