Mortgage Balance Formula:
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Definition: This calculator shows how extra payments affect your mortgage balance by calculating the new balance after each payment period.
Purpose: It helps homeowners understand how additional payments can reduce their loan term and total interest paid.
The calculator uses the formula:
Where:
Explanation: The formula calculates the new balance by applying interest to the previous balance, then subtracting both the regular payment and any extra payment.
Details: Even small extra payments can significantly reduce your loan term and total interest paid by directly reducing the principal balance.
Tips: Enter your current loan balance, annual interest rate (as decimal), regular monthly payment, and any extra payment amount. All values must be ≥ 0.
Q1: How do extra payments affect my mortgage?
A: Extra payments reduce your principal faster, which decreases total interest paid and may shorten your loan term.
Q2: Should I specify extra payments as monthly or one-time?
A: This calculator assumes recurring monthly extra payments. For one-time payments, use a different tool.
Q3: What's the best strategy for extra payments?
A: Making extra payments early in the loan term has the greatest impact on reducing total interest.
Q4: 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).
Q5: Does this account for changing interest rates?
A: No, this assumes a fixed interest rate. For adjustable-rate mortgages, use a more advanced calculator.