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Using a Mortgage Penalty Calculator

The mortgage penalty calculator is a handy tool that will enable you to estimate any penalties associated with early repayment of your mortgage. Whether you plan on paying off your loan early, refinancing at a lower interest rate, or selling your home, this calculator can provide insight into what it might cost to break your contract early.

Calculating Prepayment Penalties
Two methods are commonly used to calculate prepayment penalties: three months’ interest (the most popular method) and the interest rate differential or IRD. Whichever figure comes out higher between these two calculations will determine your estimated charge.

To use this calculator, simply input your mortgage loan documents into it. The calculator will automatically calculate your prepayment charge and give you a result.

Some mortgages feature a sliding scale of prepayment charges that could range anywhere from 1 percent to 4 percent of the outstanding balance at the time of prepayment.

Another popular method is to apply a fixed prepayment penalty. This amount usually consists of the remaining principal multiplied by how many months remain in the mortgage term.

For instance, if you are still in the first year of your loan and decide to make a prepaid mortgage payment next year, then the penalty would be $2,500; however, if you are already in year two and make the same prepaid payment as well, then the fee would increase to $13,500.

You can also access online prepayment calculators that will calculate the savings from paying off your mortgage early. These tools are free and a great resource for homeowners looking to determine what their costs might be when paying off their loan in full.

When determining if paying off your mortgage in full is a wise idea, the most important factor to consider is how much interest you will save by doing so. This amount represents the difference between your current estimated monthly payments and the new ones.

Calculating this number allows you to compare it with the prepayment penalty that must be paid and decide if it’s worthwhile. If the penalty exceeds what interest saved from staying in your mortgage, then staying may be a better choice for you; otherwise, paying it off at the end of its term could save you money overall.

The amount of prepayment charge that you will be assessed depends on several factors, so it is best to reach out to either your credit union or lender for more details. They can answer your queries and help find the ideal mortgage loan tailored to fit your requirements. Moreover, they offer valuable mortgage services and financial guidance.

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