How to model early loan or mortgage payoff?
ProjectionLab allows you to model additional payments if you plan to pay off a loan, such as a mortgage, early by making extra payments every month.
Here are the details for our example:
- Purchase Price: $500,000
- Status: Financed
- Current Loan Balance: $375,000
- Annual Percentage Rate (APR): 4.00%
- Monthly Payment: $2,000
With these inputs, your mortgage would take 25 years to pay off in the year 2051. To see the impact of making additional monthly payments, you can add a Flow to your plan. Scroll below the graph on your Plan page > click + Add Flow > House Payments > a pop-up will appear called Extra Financed Asset Payments > set your contribution to Maximize Contribution, a % of your remaining income, a specific amount, or a % of remaining balance.
Examples
1. Add $250 per month ($3,000 per year) in additional payments
Payoff occurs 5 years earlier than the original plan, in 2046.
2. Add 10% of remaining income for a set time period (now through January 2033)
Payoff occurs 6 years earlier than the original plan, in 2045.
You can explore different inputs to see the impact of early loan payoff on your overall plan. You can also scope extra payments to a specific range of years, or between certain milestones.
Related
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