1. What is Principal Curtailment?

Principal curtailment refers to making extra payments toward the principal balance of a mortgage loan. This reduces the outstanding principal amount, which can lead to significant interest savings over the life of the loan and potentially shorten the loan term.

2. How Does the Calculator Work?

The calculator uses a simple formula:

Where:

• \( Original\ Principal \) — The current outstanding balance on your mortgage
• \( Curtailment \) — The additional amount you're paying toward the principal
• \( New\ Principal \) — The remaining balance after your curtailment payment

Explanation: This calculation shows how much your mortgage balance will decrease after making an extra principal payment.

3. Benefits of Principal Curtailment

Details: Making principal curtailment payments can save you thousands of dollars in interest over the life of your loan and help you build equity faster. Even occasional extra payments can significantly reduce your loan term.

4. Using the Calculator

Tips: Enter your current mortgage balance as the Original Principal and the amount you plan to pay toward principal reduction as the Curtailment. Both values must be positive numbers, and the curtailment should not exceed the original principal.

5. Frequently Asked Questions (FAQ)

Q1: Are there any penalties for making extra principal payments?
A: Most mortgages allow principal curtailment without penalty, but you should check your loan documents or contact your lender to confirm.

Q2: How often can I make curtailment payments?
A: This varies by lender, but many allow additional principal payments at any time. Some may have restrictions on frequency or amount.

Q3: Should I pay down my mortgage or invest the money?
A: This depends on your mortgage interest rate, investment return expectations, and risk tolerance. Generally, if your mortgage rate is higher than expected investment returns, paying down debt may be advantageous.

Q4: Does curtailment affect my monthly payment amount?
A: Typically, your regular monthly payment amount remains the same, but more of each payment goes toward principal rather than interest.

Q5: Can curtailment payments reduce my loan term?
A: Yes, by reducing the principal balance, you'll pay less interest over time and may be able to pay off your mortgage years earlier.