Hong Kong Mortgage Prepayment Calculator

Mortgage interest is calculated on the declining outstanding principal. All else equal, reducing principal earlier usually lowers future interest. This differs from the Rule of 78 used by some personal loans, so a personal-loan early repayment formula should not be applied to a mortgage.

After a partial prepayment, a bank may keep the monthly payment and shorten the term, or keep the remaining term and lower the payment, subject to the contract and borrower choice. The first approach generally saves more total interest; the second focuses on monthly cash flow. Available options, minimum amounts and procedures vary by bank and facility.

Interest savings are only part of the calculation. A prepayment during the penalty period may trigger an early repayment charge, administration fee or cashback clawback, and adequate emergency savings still matter after the penalty period. The tool models both treatments from the balance, rate, term and lump sum, then deducts the entered fees from interest saved.

Using cash to prepay should be weighed against keeping liquidity. Without an adequate emergency reserve, unemployment, medical bills or building repairs may force you to borrow again at a higher cost. Conversely, if the after-tax return on deposits or low-risk assets is below the mortgage rate, reducing principal may provide a more certain saving.

Results assume the rate stays unchanged and exclude returns the prepaid cash might otherwise earn. Before deciding, obtain the outstanding balance and a formal settlement quotation for a specified date, then check penalties, cashback clawback, minimum amount, notice period and how the bank will revise the payment or maturity date.