How extra monthly payments cut your mortgage term and total interest.
Interest saved
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Time saved
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New payoff time
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Why overpaying bites so hard at Nigerian rates
Mortgage interest in Nigeria is steep by global standards, often sitting in the high twenties, so the maths of overpayment is unusually dramatic here. Every extra naira you throw at the loan lands directly on the principal, and because interest is charged on whatever balance remains, a smaller balance means less interest forever after. The effect compounds. Reduce the balance this month and you reduce the interest next month, which lets even more of your normal payment attack the principal, and so on. This calculator captures that by amortising your loan twice, once at the contractual payment and once with your extra amount bolted on, then reporting the interest you avoid and the months you shave off. It is aimed at anyone already holding a naira mortgage who has spare cash and wants to see, in hard numbers, whether prepaying beats leaving the money in a savings account.
The engine behind the two scenarios
The tool first derives your normal monthly payment from the balance, the annual rate, and the years left, using the standard amortisation formula. Then it walks the loan forward month by month. In each month it charges interest on the current balance, applies your payment, and knocks the remainder off the principal. The baseline run uses the contractual payment alone. The second run adds your extra payment on top of that same contractual figure, so more principal clears each month and the loan finishes early. The difference between the two interest totals is your saving, and the difference in the number of months is the time you claw back. Note this models a fixed extra amount paid every month, not a single lump sum, though a one-off prepayment follows the same principle.
An extra NGN 100,000 a month on a 35 million naira loan
Run the figures the tool loads by default. You owe NGN 35 million, the rate is 28 percent a year, and 18 years remain. The contractual payment comes to about NGN 822,307 a month. Left alone, the loan runs the full 216 months and racks up roughly NGN 142.6 million in interest, more than four times the amount borrowed, which tells you everything about high-rate lending. Now add NGN 100,000 a month. The loan clears in 94 months and total interest drops to about NGN 51.6 million. The saving is NGN 90,972,969, and you are debt-free 10 years and 2 months sooner, with the new payoff landing at 7 years 10 months.
| Measure | Normal payment | With extra NGN 100,000 |
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The chart contrasts the two interest bills. The teal block is the interest paid with the overpayment, and the grey block is the interest saved by paying extra each month.
Check the small print before you commit
Two things deserve a phone call to your lender first. The first is early repayment charges. Some Nigerian lenders, particularly on fixed-rate deals, apply a penalty for paying down faster, and a stiff one can eat into the saving the tool shows. Ask for the exact terms in writing. The second is how the bank treats your extra money. You want it applied to the principal, not parked as an advance on future instalments, because only a principal reduction cuts future interest. State clearly that overpayments should reduce the outstanding balance. One judgement call worth making honestly is opportunity cost. If you can earn a return above your mortgage rate elsewhere after tax, prepaying may not be optimal, but at high-twenties mortgage rates that bar is very high, and clearing the debt is usually the stronger move. None of these mechanics are tax rates, so the FIRS is not involved here, though any related stamp duty on the original facility would have been a separate matter.
Should I overpay or build an emergency fund first?
Build a basic cushion first. Money sent to the mortgage is hard to get back quickly, so clearing three to six months of expenses into accessible savings protects you against a job loss or a medical bill. Once that buffer exists, redirecting spare cash to overpayment is one of the highest, safest returns available at Nigerian mortgage rates, because every naira saves you future interest at the loan rate.
Does a smaller extra payment still help?
Yes, and more than people expect. Even NGN 25,000 or NGN 50,000 a month chips away at the principal early, when the balance and therefore the interest are largest, so the compounding works in your favour. Run a few smaller figures in the tool. You will usually find the saving is far larger than the total of the extra payments, because of the interest those early reductions prevent.