Mortgage principal reduction

Question

For a 30-year mortgage that started less than a year ago, how much will the monthly payment be after making an additional $100,000 payment towards the principal?

The mortgage currently has a balance of $295,000, and the monthly payment is $2400.

Here are the exact loan details that were included in the comments:

• Current Principal Balance The amount that is currently owed on your loan. This is not a payoff amount $293,328.23
• Original Loan Amount $295,200.00
• Loan Origination Date 04/20/2018
• Term 360
• Maturity Date 05/01/2048
• Interest Rate 4.75%

My monthly payment is $2,380 exactly. What will be the monthly payment if I pay early large payment of $100,000?

Answer 1

It will most likely be $2,380.

This will depend on the specifics of your mortgage contract, but the monthly payment generally won't automatically change in this situation.

If you're paying off such a substantial portion of the outstanding balance, you may want to look at refinancing the loan entirely to get a lower interest rate and/or lower monthly payment, although there will be additional costs associated with this.

Answer 2

You say the current balance is $295,000. So let's say you're 2 months in. Solving for the interest rate

with
s = principal
d = payment
n = number of months

s = 295000
d = 2400
n = 30*12 - 2 = 358

s = (d - d (1 + r)^-n)/r

∴ r = 0.00759326

∴ effective annual rate = (1 + r)^12 - 1 = 9.50225 %

If you carried on with this for 4 more months the balance would be

x = 4
balance = (d + (1 + r)^x (r s - d))/r = 294352.72

Checking the final balance if continued for all 358 months

x = 358
balance = (d + (1 + r)^x (r s - d))/r = 0

Final balance is zero, as required.

So if after 4 months you paid in nothing

s = 294352.72
n = 30*12 - 6 = 354
r = 0.00759326

d = r (1 + 1/((1 + r)^n - 1)) s = 2400

The payment remains at $2400, as expected.

If after 4 months you paid in $100000

s = 294352.72 - 100000 = 194352.72
n = 30*12 - 6 = 354
r = 0.00759326

d = r (1 + 1/((1 + r)^n - 1)) s = 1584.65

The payment reduces to $1584.65

You should be able to apply these example calculations your situation.

With revised figures

• Original Loan Amount $295,200.00
• Term 360
• Interest Rate 4.75% (nominal, compounded monthly)
• Monthly payment is $2,380 exactly

The above figures are not consistent. For example, calculating the loan term.

s = 295200
r = 0.0475/12
d = 2380

n = -(Log[1 - (r s)/d]/Log[1 + r]) = 170.925

If you are paying $2,380 per month the loan should be repaid in 171 months.

Check

http://www.planabettermortgage.com.au/loan-calculators/how-long-to-repay.htm