Lump Sum Repayment Calculator

See what a one-off payment into your home loan does to your term and your total interest, whether it comes from a bonus, a tax refund, an inheritance or the sale of something you no longer need.

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What this calculator works out

A single payment into a home loan can be worth far more than its face value, because it stops interest being charged on that amount for every remaining year of the loan. How much it is worth depends on when you pay it and what your lender does next.

Time taken off the loan

How many months sooner the loan is cleared if your regular repayment stays the same after the lump sum goes in.

Interest you avoid

The total interest saved over the rest of the loan. This is on top of the lump sum itself, which simply comes off the balance.

The effect of timing

The same payment made early in the loan saves far more than one made near the end, because it has more years to stop interest building.

How the maths works

Step 1. Find the balance on the day you pay

A lump sum comes off whatever you owe at that point, not off the original loan. The calculator first works out that balance from your repayments so far.
Bk = L × (1 + i)k − P × ((1 + i)k − 1) ÷ i
Bk is the balance after k repayments, L is the original loan, P is the regular repayment and i is the rate per period. On a monthly loan, i is the annual rate divided by 12.

Step 2. Subtract the lump sum and run the loan forward

The new balance is Bk minus the lump sum. What happens next depends on one decision your lender or you will make.
Keep P the same: the loan finishes early
Recalculate P over the remaining term: the repayment falls
If the repayment stays the same, a larger share of each payment goes to principal and the loan ends sooner. If the lender recalculates the repayment over the original remaining term, you pay less each month but finish on the same date. The first option usually saves much more interest, as the example below shows.

What the formula cannot see

The calculation assumes one rate for the rest of the loan and interest charged once a month. Moneysmart notes that interest on most home loans is calculated daily, and variable rates change. The result is a reliable comparison between choices rather than the exact figure on your statement.

A worked example, start to finish

The figures below are illustrative and are not a rate offer, a quote, or a prediction. The loan is $500,000, principal and interest, over 30 years at an assumed rate of 6.00 per cent p.a. that stays the same. The monthly repayment is $2,997.75 and total interest over 30 years, with no extra payments, is about $579,191.
A $20,000 lump sum after five years
Balance before the payment: about $465,272
Balance after the payment: about $445,272

Option 1, keep the repayment at $2,997.75
Loan finishes 27 months early
Interest saved: about $63,450

Option 2, recalculate the repayment
Repayment falls by about $128.86 to $2,868.89
Loan finishes on the original date
Interest saved: about $18,658
Both options put the same $20,000 into the loan. Keeping the repayment where it is saves more than three times as much interest, because the whole of the old repayment keeps working against a smaller balance.
The same $20,000, paid at different points
After 1 year: about $84,165 interest saved, 34 months sooner
After 5 years: about $63,450 saved, 27 months sooner
After 10 years: about $42,954 saved, 21 months sooner
After 20 years: about $15,414 saved, 11 months sooner

Different amounts, paid after 5 years
$10,000: about $33,171 saved, 14 months sooner
$50,000: about $140,249 saved, 63 months sooner

What you ask the lender to do next matters as much as the payment

When a lump sum goes in, some lenders keep your repayment the same and others recalculate it lower over the remaining term, and some let you choose. In the example, that one decision is the difference between saving about $63,450 and about $18,658.
If a lower repayment helps your budget, recalculating is a reasonable choice. If you want the lump sum to do as much as possible, ask your lender to keep your repayment at its current level, or set a higher repayment yourself if the lender recalculates automatically.

Lump sum, offset or redraw

The same money can go into your loan in different ways. On interest alone they can be very close. The difference is access and flexibility.

Straight onto the loan

The balance drops immediately and interest is charged on the lower amount from then on. On many loans the money may then sit in a redraw facility. How and when you can take it back out depends on your loan terms.

Into an offset account

Moneysmart explains that the offset balance reduces the part of the loan charged interest. In the example, $20,000 held in an offset from year five, with repayments unchanged, saves the same interest as paying it into the loan, while the money stays in your own account.

Split between the two

Some people pay part of a windfall into the loan and keep part in an offset or savings as a buffer. The interest saving follows the amount that sits against the loan.

On a fixed rate loan

Extra repayments above your lender’s allowed amount during a fixed period can trigger break costs. Westpac, for example, explains that break costs can apply when prepayments exceed its threshold. Check your own limit before paying in a large sum.
The offset comparison assumes the full $20,000 stays in the offset account for the rest of the loan and the offset is correctly linked. Moneysmart warns borrowers to check that their offset account is linked properly.

What the calculator does not show you

A lump sum calculator gives you the size of the saving. It cannot see your contract, your cash buffer or the other debts in your life.

Fees and limits

Moneysmart advises checking whether extra repayments are allowed and whether any fees apply. Variable and fixed portions of the same loan can have different rules.

Your emergency buffer

Money paid into a loan is harder to reach than cash in the bank. Think about how much accessible cash you want to keep for emergencies before paying a large sum in.

Dearer debts

If you also have a credit card or personal loan at a higher rate, paying that down first usually saves more interest per dollar than the home loan.

Rate changes

If the variable rate rises, the saving from a lump sum made today grows. If it falls, the saving shrinks. The calculator holds the rate constant.

Before you pay in a lump sum

Five things to confirm with your lender

A short call or message to your lender answers all of these. The last one is the question most people forget, and it decides how much of the saving you actually get.
Whether extra repayments are allowed on each part of your loan
Any limit or fee, especially during a fixed rate period
Whether the money goes to redraw, and how you can access it
Whether an offset account would suit you better
Whether your repayment will stay the same or be recalculated
Once the payment has gone in, check your next statement. Confirm the balance has dropped by the full amount and the repayment is at the level you asked for.

Regular extra or one lump sum?

This page is about a single payment. If you can add a set amount to every repayment instead, the extra repayment calculator shows that path. Many people do both: a regular extra amount, plus bonuses and tax refunds when they arrive.
Related tools on this site: extra repayment calculator for a regular extra amount, fortnightly and weekly repayment calculator, home loan offset calculator and loan repayment calculator. If your current loan penalises extra payments, it may be worth reviewing refinancing your loan.
Paying from income rather than a one-off sum? Use the extra repayment calculator.
Sources
Australian Government, ASIC Moneysmart: Pay off your mortgage faster and Mortgage offset accounts.
Westpac: What is a break cost?, used as one lender’s explanation of prepayment break costs, not as a rule for all lenders.

About the figures on this page. Every balance, repayment, term and interest amount on this page was calculated directly from the formulas shown above, using a $500,000 loan over 30 years, monthly repayments and an assumed constant rate. The rate used is illustrative and is not an offer.

General information only. Nothing on this page takes your objectives, financial situation or needs into account, and it is not a recommendation to make an extra repayment. Loanity is a credit representative and can provide credit assistance once we understand your circumstances.

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Bring your lump sum result and we will check your loan terms, any limits or fees, and whether the money works harder in the loan or an offset.
STILL GOT QUESTIONS?

Lump sum repayment questions, answered

How much will a lump sum payment save on my mortgage?

It depends on the amount, the rate, how far into the loan you are and whether your repayment stays the same. In the example on this page, $20,000 paid after five years on a $500,000 loan at an assumed 6.00 per cent p.a. saves about $63,450 in interest and finishes the loan 27 months early.

Keeping the repayment the same and shortening the term saves more interest. In the example, it saves about $63,450, compared with about $18,658 if the repayment is recalculated lower. A lower repayment can still be the right choice if cash flow is tight.

Earlier in the loan, if you can. The same $20,000 saves about $84,165 after one year but about $15,414 after twenty years, because early in the loan more of each repayment goes to interest. Moneysmart makes the same point about extra payments in the early years.

Often yes, up to a limit set by your lender. Paying more than that limit during the fixed period can trigger break costs. Check the limit in your loan documents or ask your lender before you pay.

On interest alone the two can be almost identical, provided the money stays in the offset. The offset keeps the money in your own account, while money paid into the loan may sit in a redraw facility with its own access rules. Moneysmart suggests weighing any offset fees against the interest you expect to save.

Moneysmart suggests a tax refund, bonus or other lump sum can go straight into your mortgage. Before you do, make sure you have an emergency buffer and no dearer debts such as a credit card that would be better paid first.

If your loan has a redraw facility, you may be able to withdraw extra repayments. Some lenders limit how much you can redraw, charge a fee or delay access. Check your loan terms before you rely on getting it back.

A lump sum is a single one-off payment. Extra repayments usually means adding a set amount to every regular repayment. Both reduce the balance and the interest. Use our extra repayment calculator for the regular version.

Not always. Some lenders keep the repayment the same so the loan finishes sooner, and others recalculate it lower. Ask your lender which applies and tell them which you prefer.

We do not charge you a fee for arranging your finance. Brokers are generally paid a commission by the lender when a loan settles. If any fee from us would ever apply to your situation, you would be told in writing before you proceeded.

Important information about this calculator
This calculator estimates the effect of a one-off payment on your home loan term and total interest, using the loan amount, interest rate, term, lump sum amount and timing you enter. It assumes the rate stays the same and does not account for fees, break costs, redraw or offset balances, daily interest calculation, or how your lender adjusts repayments after an extra payment.

Interest rates and lender policies change over time. Loanity does not guarantee that you will achieve the calculated outcome or that any loan will be approved. The results are general information only and are not financial advice.