Home Loan Payoff Time

Mortgage Payoff Time with Extra Payments

A Brazilian housing loan runs on one of two systems: Tabela Price, with a fixed installment, or SAC, where the installment shrinks over time. Either way the balance moves month to month according to balance_n+1 = balance_n × (1 + i) − installment − extra. Here i is the monthly interest rate and extra covers any additional amortization you throw at it. Once the balance hits zero, the loan is done.

Why does paying early help so much? Because interest is always charged on what you still owe. On a 30-year contract, slipping in one extra installment a year tends to cut the term by around 30% and spare you tens of thousands of reais in interest. People usually fund these extra payments with FGTS (which you can tap every two years for a property purchase or amortization, under specific rules), the 13th salary, profit sharing, or a tax refund.

Applications

Run the simulation when you need to pick between the two options Brazilian banks offer: shrink the installment while keeping the term, or shorten the term while keeping the installment. The second one saves more interest. And when you compare contracts, look at the CET (Custo Efetivo Total) rather than the advertised rate. The CET is regulated by the Central Bank and folds in insurance (MIP, DFI), the administrative fee and taxes.

FAQ

Price or SAC, which pays off faster with extras? SAC wins. Its early installments knock down more principal, so the same extra contribution makes a bigger dent in the balance.

Is it worth amortizing if my investments yield more than the loan rate? Weigh your net return after Income Tax against the loan’s CET. When the CET sits around 11–13% per year, beating that on an after-tax basis is tough, which is why amortizing tends to come out ahead.

Can I use FGTS at any time? No. There has to be at least two years between uses, you need three years of FGTS contributions, and the property has to meet the Sistema Financeiro de Habitação (SFH) criteria.