1. What is a Mortgage Payoff Calculator?

Definition: This calculator determines how many payments are needed to fully pay off a mortgage or loan based on the monthly payment amount, principal, and interest rate.

Purpose: It helps borrowers understand how long it will take to pay off their loan under current payment terms.

2. How Does the Calculator Work?

The calculator uses the formula:

Where:

• \( n \) — Number of payments (unitless)
• \( M \) — Monthly payment amount (USD)
• \( P \) — Principal loan amount (USD)
• \( r \) — Monthly interest rate (decimal)

Explanation: The formula calculates how many periods are required to amortize a loan given fixed periodic payments.

3. Importance of Payoff Calculation

Details: Understanding payoff time helps with financial planning, comparing loan options, and evaluating the impact of extra payments.

4. Using the Calculator

Tips: Enter your monthly payment, principal amount, and monthly interest rate (annual rate ÷ 12). Ensure monthly payment exceeds the interest accrued each month.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate (APR) by 12 (months) and by 100 (to convert to decimal).

Q2: Why does my calculation show an error?
A: This occurs when monthly payment doesn't cover the interest (M ≤ P×r). You need higher payments to pay down principal.

Q3: How can I pay off my loan faster?
A: Increase monthly payments, make biweekly payments, or apply lump sums to principal.

Q4: Does this include taxes and insurance?
A: No, this calculates principal and interest only. For full PITI payments, add those amounts separately.

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans with constant payments. Adjustable rates require more complex calculations.