Question 1

How much does a $10,000 lump sum payment save on a mortgage?

Accepted Answer

A $10,000 lump sum applied to principal in year 5 of a typical 30-year, $320K loan at 6.5% saves approximately $25,000 in interest and shortens the loan by about 14 months. The earlier you apply it, the more you save.

Question 2

When is the best time to make a lump sum mortgage payment?

Accepted Answer

The earlier in the loan, the better. A lump sum in year 1 saves dramatically more interest than the same amount in year 15, because earlier payments avoid more years of compounded interest.

Question 3

Should I use my tax refund to pay down my mortgage?

Accepted Answer

For most homeowners, applying a tax refund to mortgage principal is a great use — it is found money, the savings compound for decades, and it accelerates your payoff date painlessly.

Question 4

Will a lump sum payment lower my monthly mortgage payment?

Accepted Answer

No — by default, a lump sum reduces principal and shortens the loan but does not change your monthly payment. To lower the monthly payment after a lump sum, ask your servicer about a "mortgage recast."

Question 5

What is a mortgage recast and how does it differ from a lump sum?

Accepted Answer

A recast re-amortizes your loan over the original term using the new lower balance, reducing your monthly payment. A standard lump sum keeps the payment the same but shortens the loan. Recasts typically cost $250-$500.

Question 6

Should I use an inheritance to pay off my mortgage?

Accepted Answer

Often yes — especially if your mortgage rate is above 6%, you have a fully funded emergency fund, and you are within 10 years of retirement. Otherwise, splitting between mortgage and investments can be smart.

Lump Sum Mortgage Payment Calculator

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