Lump sum repayment calculator
Use our simple calculator to work out how much you can save by making a lump sum repayment on your home loan.
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If you make a large, one-off extra repayment (a lump sum) to your mortgage you can reduce your debt and the time it takes to pay it off. This means you end up paying less interest in the long run too. Our lump sum repayment calculator is an easy tool that lets you estimate how much a lump sum repayment can save you in time and interest.
Use the calculator below or learn how it works. We've also provided some tips on how to make extra mortgage repayments (a lump sum repayment might not even be the most effective way to do it).
How to use the lump sum calculator
In order to use a lump sum calculator you’ll need the following details:
- Your loan amount. This is the amount of money you borrowed.
- The loan term. This is the length of your home loan. Most Australians choose between 20 and 30 year loan terms.
- The interest rate. The loan's interest rate affects how much interest you pay every month.
- The repayment frequency. Repayments can be weekly, fortnightly, or monthly, depending upon your agreement with your lender.
- Lump sump repayment. Enter the single amount you wish to add to the loan as a lump sum repayment.
- Lump sum made at year. This refers to when you make the lump sum repayment. If you're two years into your loan, select 2 years.
Once you input all of the necessary information into the calculator you'll be able to see the results right away and figure out if putting a lump sum toward your mortgage will be worth it in terms of savings. Usually a lump sum payment will go toward your principal more so than interest, which will help you pay down your loan faster than just making general repayments.
Susan just inherited $10,000 unexpectedly. She decides to take some of it and pay a lump sum toward her mortgage. In order to figure out exactly what a lump sum will do for her mortgage she uses a lump sum calculator.
Susan opens the loan calculator and then enters in her information into the designated fields. Susan inputs her original loan amount, $300,000. She then inputs her interest rate (5.5%), her loan term (20 years) and her repayment frequency (monthly).
Susan then has to input her lump sum information. She is looking to put down $10,000 and has had her mortgage for two years. According to the calculator, Susan has been making monthly payments of $2,063.66 a month and has a remaining balance of $282,571 after two years. If she were to put a lump sum of $10,000 toward her loan she’ll save $16,141 on interest and take a year off her loan.
An alternative to making a lump sum repayment is an offset account
If you have come into a large sum of money you don't have to throw it straight into your home loan. If your home loan has an offset account you save the money in the account and you'll enjoy a similar benefit to the lump sum repayment but with greater flexibility.
An offset account is a bank account connected to your home loan. Any money that you save in it temporarily reduces (or offsets) your loan principal. This means your repayments stay the same but you're paying less interest and therefore pay off the whole loan faster.
This is the same benefit as a lump sum repayment but with one huge difference. Once you pay the lump sum into your home loan it's gone. Your lender may let you access some of it via a redraw facility but it's their money now.
With an offset account you still retain total control over the cash while receiving the same benefit. So if you suddenly need some money to cover an urgent expense it's right there. It's the best of both worlds.
However, if your loan doesn't have an offset account and you're confident you won't need the lump sum again any time soon then simply throwing it into your home loan is not a bad idea. Getting out of debt faster is always wise.
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