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Interest Savings Formula:
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The Interest Savings calculation determines the total interest saved by paying off home loans early. It helps borrowers understand the financial benefits of making additional payments or paying off their mortgage ahead of schedule.
The calculator uses the interest savings formula:
Where:
Explanation: The formula calculates the difference between the total amount paid (EMI × N) and the principal amount, which represents the interest saved by early repayment.
Details: Calculating interest savings helps homeowners make informed decisions about mortgage prepayment strategies, potentially saving thousands in interest payments over the life of the loan.
Tips: Enter your monthly EMI payment, the number of payments you plan to make, and the principal loan amount. All values must be positive numbers.
Q1: How does early loan repayment save interest?
A: Early repayment reduces the principal balance faster, which decreases the amount of interest that accrues over the remaining loan term.
Q2: Are there prepayment penalties for home loans?
A: Some lenders charge prepayment penalties. Always check your loan agreement before making extra payments.
Q3: Should I invest instead of paying off my mortgage early?
A: This depends on your interest rate vs. potential investment returns. Generally, if your mortgage rate is higher than expected investment returns, paying off debt may be better.
Q4: How much can I save by making extra payments?
A: Even small additional payments can significantly reduce total interest paid and shorten the loan term. This calculator helps quantify those savings.
Q5: Does this calculation account for compound interest?
A: The formula provides a simplified calculation. For precise results, consult with a financial advisor as mortgage interest is typically compounded monthly.