Home
Back
Overpay Savings Formula:
| From: | To: |
This calculator compares the financial benefit of overpaying your mortgage versus investing the same amount of money. It calculates the interest saved by making additional mortgage payments compared to potential investment returns.
The calculator uses the compound interest formula:
Where:
Explanation: The formula calculates the future value of money that would be saved by paying down mortgage debt versus investing it elsewhere.
Details: Understanding the trade-off between mortgage overpayment and investment opportunities helps homeowners make informed financial decisions about debt reduction versus wealth accumulation.
Tips: Enter the principal amount in dollars, interest rate as a decimal (e.g., 0.05 for 5%), and the time period in years. All values must be positive numbers.
Q1: Should I overpay my mortgage or invest?
A: It depends on your mortgage interest rate vs. expected investment returns, risk tolerance, and financial goals. Generally, if investment returns are higher than your mortgage rate, investing may be better.
Q2: What are the tax implications?
A: Mortgage interest may be tax-deductible in some countries, while investment returns may be taxable. Consult a tax professional for specific advice.
Q3: Does this consider compound frequency?
A: This calculator uses annual compounding. For more precise calculations, consider the actual compounding frequency of your mortgage and investments.
Q4: What about investment risk?
A: Mortgage overpayment provides a guaranteed return (your mortgage interest rate), while investments carry varying degrees of risk and potential volatility.
Q5: Should I consider early repayment fees?
A: Yes, some mortgages have early repayment charges. Always check your mortgage terms before making overpayments.