Why Lump Sum Prepayments Pack Such a Powerful Punch
When you inject a lump sum into your loan, the lender recalculates the interest on the remaining principal from the very next day.
Rule of Thumb: Every $10,000 lump sum paid in the first 5 years of a 30-year 7% mortgage typically saves over $32,000 to $45,000 in interest charges!
Best Sources for Lump Sum Prepayments
- Year-End Bonuses & Commissions: Put 50% towards your mortgage and enjoy 50% for personal enjoyment.
- Tax Refunds: Directing an annual $3,000–$5,000 tax return directly into your loan eliminates years of debt.
- Investment Rebalancing: Taking profits from high-flying equities and locking in a guaranteed 7% debt payoff return. Compare your returns with our Prepay vs Invest Calculator.