# Mortgage principal reduction

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?

• Your original monthly payment should only be \$1539.90. Try checking here: financialmentor.com/calculator/… – Chris Degnen Nov 1 '18 at 10:15
• I.e. `(0.0475/12)*(1 + 1/((1 + 0.0475/12)^360 - 1))*295200 = 1539.90` – Chris Degnen Nov 1 '18 at 10:18
• @ChrisDegnen the \$2,380 figure likely includes property tax and insurance – yoozer8 Nov 1 '18 at 12:12

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.

• In addition to this, some lenders offer free reamortization of the loan, that is, recalculating (lowering) the monthly payment, to stretch the remainder of the loan back to the original contractual term. – void_ptr Oct 31 '18 at 21:12
• @void_ptr Yes, although I believe the process is called "recasting" a mortgage, for some reason. – Guest5 Nov 1 '18 at 0:40
• Alternately, the OP could continue making the same payment; he would immediately be decreasing the interest per payment by about \$400, and reducing the loan payoff time by about 15 years. – user4556274 Nov 1 '18 at 12:38

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

• If indeed OP has 9.5% annual interest rate on a mortgage, this is insane. I'd say refinance ASAP, and negotiate a more sane interest rate. That, or OP's numbers are off. – void_ptr Nov 1 '18 at 0:02