Mortgage Term Reduction Calculator
Interest saved by shortening mortgage term.
Calculate interest saved by reducing your mortgage term from one length to another at the same rate. Enter loan amount and see the result instantly.
What this tool does
Enter loan amount, rate, current term, and proposed shorter term. The tool shows interest saved.
Enter Values
Formula Used
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Disclaimer
Results are estimates for educational purposes only. They do not constitute financial advice. Consult a qualified professional before making financial decisions.
200,000 at 5% over 25 years costs 350,000 total; over 20 years costs 317,000 — a 34,000 interest saving for an extra 150/month. The trade-off is higher monthly commitment. Most people pay down longer than they could afford to. Matching term to realistic monthly comfort rather than maximum comfort is worth modelling.
Quick example
With loan amount of 200,000 and annual rate of 5% (plus current term of 25 and shorter term of 20), the result is 33,975.27. Change any figure and watch the output shift — it's often more useful to see the pattern than to memorise the formula.
Which inputs matter most
You enter Loan Amount, Annual Rate, Current Term, and Shorter Term. Not every input has equal weight. Flip one at a time toward extreme values to feel which ones move the needle most for your situation.
What's happening under the hood
Compute monthly payment at each term, total repayment, subtract to find interest saving. Standard amortisation. The formula is listed in full below. If the number looks off, you can retrace the calculation by hand — that's the point of showing the working.
What the headline rate hides
Lenders quote a rate; what you pay is a blend of that rate, fees, insurance, and any early-repayment penalty built into the product. The figure here isolates the core interest cost so you can compare like-for-like across deals — then add the other costs separately before signing anything.
What this doesn't capture
The figure excludes arrangement fees, valuation costs, legal fees, insurance, and any early-repayment charges — those can add several thousand to the headline cost. Rate changes at renewal for fixed-term deals will shift the picture further. Use this for the core interest/principal math and add the other costs on top.
Term reduction produces an interest saving based on the inputs provided.
Inputs
This example uses typical values for illustration. Adjust the inputs above to match a specific situation and see how the result changes.
Sources & Methodology
Methodology
Compute monthly payment at each term, total repayment, subtract to find interest saving. Standard amortisation.
References
Frequently Asked Questions
Does it always save?
Monthly payment increase?
Better to overpay instead?
What about rate change risk?
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