Find Your Mortgage Freedom Day

How to read these results

The two numbers worth paying attention to are the payoff date and the interest saved, and they behave very differently. Interest saved scales roughly with how much extra you pay. Time saved does not — it is front-loaded. An extra repayment in year 2 removes principal that would otherwise have accrued interest for 28 more years; the identical payment in year 25 only avoids five years of it. That is why the first modest amount you add buys more months than the same amount added later, and why starting small now generally beats waiting until you can afford a lot.

What this tool models — and what it deliberately doesn't

It models a standard reducing-balance loan: interest is charged each period on the outstanding balance, your minimum repayment is calculated to clear the balance over the remaining term, and anything extra goes entirely to principal. The projection assumes your interest rate stays fixed for the remaining term.

• Rate changes are not forecast. On a variable loan your real payoff date will move with rates. Re-run the numbers when your rate changes rather than trusting a projection made years earlier.
• Fees, insurance and rates bills are excluded. The figures cover principal and interest only, so they are not a full cost-of-ownership estimate.
• Offset and redraw accounts are not modelled separately. Money in an offset account reduces the balance interest is charged on, so its effect is broadly similar to an extra repayment — but it stays accessible, which changes the decision even when the arithmetic looks alike.
• Tax is not applied. In countries where mortgage interest is deductible, part of your interest cost may come back to you, which reduces the real benefit of paying the loan down faster.

Two mistakes worth avoiding

The first is paying extra into a loan with a fixed-rate period that caps annual extra repayments — some lenders charge a break fee once you exceed the cap, which can wipe out the interest you were trying to save. Check your loan terms for an annual limit before committing to a figure.

The second is clearing the mortgage while carrying more expensive debt. A mortgage is usually the cheapest money you will ever borrow. If you are also paying a credit card or personal loan at a materially higher rate, every spare unit of currency does more work there first — the guaranteed return equals whichever interest rate you avoid, so the highest rate wins.

Frequently Asked Questions