Finance
Mortgage Payoff Calculator
Calculate interest savings and how much faster you will pay off your mortgage by adding extra monthly payments.
Inputs
Results
Total Interest Saved
$0.00
Standard Payoff Time
0 years
New Payoff Time
0 years
Time Saved
0 months
Standard Total Interest
$0.00
New Total Interest
$0.00
How It Works
The mortgage payoff calculator compares a baseline mortgage amortization schedule against an accelerated schedule. By making extra principal payments each month, the outstanding loan balance is reduced faster. Because interest accrues on the remaining balance, reducing the principal quicker decreases the amount of interest charged in all subsequent periods, creating a compounding compounding benefit of saved time and money.
Formula Used
Accrued Monthly Interest = Remaining Balance × (Annual Interest Rate / 12)
Interest on a mortgage is computed monthly based on the outstanding principal balance. By making extra principal payments, the remaining balance is reduced faster, which lowers the interest charged in all subsequent compounding periods.
Standard Payment = Balance × [r(1+r)^n] / [(1+r)^n − 1]
The standard payment is determined using the standard amortization formula. The accelerated payoff is calculated by subtracting the principal portion of the standard payment plus any extra payment from the remaining balance each month until the balance is zero.
Worked Example
Here is a step-by-step example of how these values are calculated:
Current Balance
$300,000
Interest Rate
6.5%
Remaining Term
25 Years
Extra Payment
$200/mo
Result: Total Interest Saved: $55,301.12. Time Saved: 4 Years, 2 Months (Payoff term cut from 25 years to 20 years, 10 months).
Frequently Asked Questions
Does my extra payment automatically go to the principal?
Usually, yes, but you must specify to your loan servicer that the extra funds should be applied directly to the principal balance rather than prepaying the next month's payment.
Are there prepayment penalties on mortgages?
Most modern home mortgages do not have prepayment penalties, but it is important to review your specific loan contract to verify before making large additional payments.