Quick answer: A 600,000 balance at 4.5% paid at 4,000 a month takes 18 yr 5 mo; adding 1,000 a month cuts it to 13 yr 4 mo and saves 84,832.16 in interest.
How it's calculated
Each month the lender charges interest on the remaining balance: balance × annual rate ÷ 12. Whatever is left of your payment reduces the balance. The calculator repeats this month by month until the balance reaches zero.
A one-time payment is taken off the balance today; the extra monthly amount is added to every payment. Both cut the balance that later interest is charged on, which is where the saving comes from.
If your payment is not more than the monthly interest, the balance never falls. Islamic home finance with a fixed profit rate follows the same maths; ask your bank how it rebates profit on early settlement.
Worked examples
- 600,000 at 4.5%, 4,000 a month, +1,000: 221 → 160 months, saves 84,832.16
- Same, plus 100,000 paid now: 221 → 126 months, saves 155,595.62
Frequently asked questions
Should I pay off my mortgage early or invest?
Paying early earns you your loan rate, risk-free. If you can reliably earn more elsewhere after costs, investing may come out ahead; many people do both.
Are there fees for early settlement?
Often. In the UAE the Central Bank caps it at 1% of the outstanding balance or AED 10,000, whichever is less; elsewhere the contract sets the terms. Check before you pay.
What if I want a lower payment instead?
Ask the bank to recalculate the payment over the remaining term after a lump sum, or compare a new loan with the refinance calculator.
Is a one-time payment or a monthly extra better?
Money sooner saves more. A lump sum now beats the same total spread over later months, but regular extras are often easier to keep up.
What if my payment barely covers the interest?
The balance would fall very slowly or not at all. The calculator asks for a higher payment if it can't clear the loan.
Does paying early make sense near the end of the loan?
It saves less then, as most of the interest has already been paid. Check for an early settlement fee as well.