Impact of making a $50,000 lump sum payment on mortgage payoff

Hello everyone- I am trying to determine the impact of making a $50K lump sum payment on my mortgage this month. My goal is to pay off my mortgage ( I have retirement, college, emergency money already saved). The original loan amount was for 440K and I currently owe approximately 400K. It is a 30 year loan that originated in ~October 2010. The interest rate is 4.25%. I plan to continue to make my monthly payment of $2216 and not "recast" (and pay more when I can). I'm not great at the math or understanding the calculators - any help would be very much appreciated.

1 Answer

Hi Suzanne,

Congrats on your fiscal responsibility! Looks like the $2215 payment you cite is just P&I (440K at 4.25% for 30 years equals 2164/mn, so we're close there). You have 25 years left on the original amortization. If you put 50K extra down against the principle without recasting, you'll cut the term to about 19 years, with a new payment of $2240. The total repayment you owe now, excluding any additional payments, is $664,800. The total on the new loan would be $510,720, plus the 50K you are putting down for a total cost of $560,7200, and an interest savings of just over 100,000. Nice! Another option you might consider is refinancing to a 15 year loan. If you borrowed the same 350K for 15 years at 3.25% (which is about where 15 yr rates arenot an offer to lend, individual rates vary based on credit scores, etc), your new payment would be $2459, with a net total cost of $442,620, plus your 50K for a total of $492K, so you'd save almost 70K over doing the lump sum and continuing to pay on your current loan (without factoring in any additional payments, of course).

If $2459 is more than you feel comfortable committing to, by all means, pay the 50K down and shorten the loan term. It sounds like you're in pretty good shape financially, however, and if you're planning to pay extra anyway, why not do so at a significantly lower rate?

I'd be glad to give you further info and more precise numbers, if you'd like, and I lend nationally. You can contact me through my profile. Hope this advice was helpful! Ted