Shorten Term vs. Recast Lower Monthly Payment: The Exact Amortization Math
When making a lump-sum principal payment, keeping your monthly payment unchanged (shortening the term) compounds your principal reduction every single month thereafter—typically saving 2x to 2.5x more total interest than stretching the remaining balance over the original 30-year timeline.
Frequently Asked Questions (FAQ)
Q1 When does reducing the monthly payment make more sense than shortening the term?
If your household faces income volatility, upcoming childcare costs, or wants maximum monthly cashflow flexibility—especially if your bank allows unlimited penalty-free extra payments later—lowering the required minimum payment reduces risk while still letting you overpay voluntarily.