Early Mortgage Payoff Calculator Ramsey

Early Payoff Formula:

\[ n' = \frac{-\log(1 - (P \times r) / (M + E))}{\log(1 + r)} \]

Principal (P):

USD

Interest Rate (r):

decimal

Monthly Payment (M):

USD

Extra Payment (E):

USD

Reduced Payments (n'):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is an Early Mortgage Payoff Calculator?

Definition: This calculator determines how much you can reduce your mortgage term by making extra payments, following Dave Ramsey's financial principles.

Purpose: It helps homeowners understand the impact of additional payments on their mortgage timeline and total interest paid.

2. How Does the Calculator Work?

The calculator uses the formula:

\[ n' = \frac{-\log(1 - (P \times r) / (M + E))}{\log(1 + r)} \]

Where:

\( n' \) — Reduced number of payments (unitless)
\( P \) — Principal loan amount (USD)
\( r \) — Monthly interest rate (decimal)
\( M \) — Regular monthly payment (USD)
\( E \) — Extra monthly payment (USD)

Explanation: The formula calculates how many payments you can eliminate by applying additional principal payments each month.

3. Importance of Early Mortgage Payoff

Details: Paying off your mortgage early can save thousands in interest and provide financial freedom sooner, a key principle in Dave Ramsey's Baby Steps.

4. Using the Calculator

Tips: Enter your current mortgage principal, interest rate (as decimal), regular payment, and any extra amount you can pay. All values must be > 0 except extra payment which can be 0.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide your annual rate by 12 (e.g., 6% APR = 0.06/12 = 0.005 monthly).

Q2: Should I pay extra on principal or refinance?
A: Ramsey recommends paying extra on your current mortgage rather than refinancing to a shorter term.

Q3: How accurate is this calculation?
A: It provides a close estimate but consult your lender for exact figures as terms may vary.

Q4: What's the snowball effect on mortgages?
A: As you pay down principal, more of each payment goes toward principal, accelerating payoff.

Q5: Is this better than investing the extra money?
A: Ramsey recommends paying off all debt (including mortgage) before heavy investing for peace of mind.