In general, it is advisable to pay off the mortgage when you have a good amount of money saved, especially if we know that we will not need it in the future. This can happen if we receive an extra payment of money that we did not have, such as for payment for a pending job or for an inheritance. Capital repayments should be made at the beginning of the loan, as it will help us pay less interest. At the end of the mortgage, it will be of little use to us. In addition, there are financial advantages if you want to pay off your mortgage, such as the interest you save by reducing the principal. To calculate the interest savings from amortizing your mortgage, you can use an online amortization simulator. You only need to enter the amount you want to repay, the years you have left on your mortgage, the money you have left to pay, the interest rate and the type of mortgage (fixed or variable). The simulator will show you how much you would save if you amortize the mortgage by reducing the payment or the term. Also, you can use a mathematical formula to calculate the interest on your mortgage.
The formula is the following:
Interest=Outstanding capital x Interest rate / 12
For example, if you have a mortgage of 200,000 euros with an interest rate of 1.75% and you want to repay 10,000 euros, the interest would be:
Interest=200,000 x 0.0175 / 12=291.66 euros
Finally, you can compare the conditions of your mortgage with other alternatives to save money with your mortgage, such as cancellation or novation. These options may involve a change in the interest rate, term or commissions.
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