Mortgage Payoff Calculator
This mortgage payoff calculator shows how much sooner your loan is gone if you pay a little more each month – or how much more you need to pay to be debt-free by a target year. Example: a balance of 200,000 at 6% with a payment of 1,199.10 runs for 360 more months; 200 extra each month ends it after 252 payments and saves 79,800.92 in interest.
Source: OpenStax: Principles of Finance, Chapter 8.3 “Loan Amortization” (annuity formula, split of each installment into interest and principal). Updated: .
How it is calculated
Every extra unit of money you pay towards a mortgage reduces the principal at once – and from then on you pay no interest on it for the rest of the term. That is why small extra payments shorten a long loan far more than their size suggests. This calculator compares your loan as it runs today with the same loan plus extra payments.
How the calculation works
Each month the lender charges interest on the remaining balance: balance × annual rate ÷ 12. Whatever is left of your payment reduces the balance. The calculator repeats this month by month, once with your current payment and once with payment plus extra, until the balance is zero, and adds up the interest on both paths. A one-off payment is deducted from the balance before the first month.
Worked example
Balance 200,000, 6% interest, payment 1,199.10. In the first month the interest is 200,000 × 0.06 ÷ 12 = 1,000.00, so only 199.10 goes to principal. Without extra payments the loan needs 360 payments and costs another 231,677.06 in interest. With 200 extra, 399.10 reduces the balance in month one; the loan ends after 252 payments, the remaining interest is 151,876.14, and 79,800.92 is saved.
| Extra per month | Payments left | Interest saved |
|---|---|---|
| 0 | 360 | – |
| 100 | 295 | 49,138.70 |
| 200 | 252 | 79,800.92 |
| 500 | 179 | 129,142.40 |
Paying off by a target year
Turned around, the annuity formula gives the payment that clears a balance in a chosen number of months: balance × i ÷ (1 − (1 + i)^−n), with i as the monthly rate. For the example loan, 15 years require 1,687.72 a month, that is 488.62 more than today; 20 years need 233.77 extra and 10 years 1,021.32.
One-off payments
A lump sum works like many small extra payments made at once. Paying 20,000 on the example loan today, with no monthly extra, cuts the term from 360 to 279 payments and saves 77,842.81 in interest – the earlier in the loan, the stronger the effect.
Before you pay extra
Check whether your contract charges a fee for early repayment or caps extra payments per year, and make sure the lender books the money against principal instead of holding it for the next instalment. The calculator shows the mathematics; whether paying down the loan is the best use of your money depends on your reserves and your other options.
Frequently asked questions
How much faster do I pay off my mortgage with 200 extra a month?
It depends on balance, rate and remaining term. On 200,000 at 6% with 1,199.10 a month, 200 extra removes 108 payments – nine years – and saves 79,800.92 in interest.
How much extra do I need to pay to be done in 15 years?
For the example loan the payment has to rise from 1,199.10 to 1,687.72, so 488.62 extra a month. Choose “How much extra for my target payoff time?” and enter your own figures.
Is a lump sum better than monthly extra payments?
Money paid earlier saves more interest. A one-off 20,000 today saves 77,842.81 on the example loan – almost as much as 200 a month for 21 years, which adds up to about 50,400.
Why does my lender show a slightly different payoff date?
Lenders may count interest by the day, round each month to the cent or apply extra payments on a different date. Escrow amounts in your payment are also not part of the loan. Enter only principal and interest as the payment.
What if my payment is lower than the interest?
Then the balance grows instead of falling, and the loan is never paid off. The calculator reports this and shows the first month’s interest so you can check the figures.
Sources and legal basis
- OpenStax: Principles of Finance, Chapter 8.3 “Loan Amortization” (annuity formula, split of each installment into interest and principal)
- Consumer Financial Protection Bureau: What is a prepayment penalty? (Vorfälligkeitsgebühren vor Extra-Zahlungen im Vertrag prüfen)
As of: · Editorial policy
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