Mortgage Payoff Calculator
Calculate the interest and time you can save by making extra monthly payments toward your mortgage principal.
Calculation Results
Your standard monthly principal and interest payment.
The standard payment plus your extra monthly principal contribution.
Total interest remaining to be paid under the standard schedule.
The number of years shaved off the life of the loan.
The net lifetime interest savings from paying off the mortgage early.
How This Calculator Works
To calculate early payoff benefits:
- Enter your current outstanding mortgage balance.
- Provide the interest rate and the years remaining on your term.
- Input the additional amount you plan to pay each month directly toward your principal.
The calculator instantly uses the logarithm payoff formula to estimate how many years you will shave off the loan and the total interest savings.
Formula & Calculations
The standard monthly mortgage payment (P&I) is calculated using standard amortization:
Standard Payment = Balance × [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]
Where r = interest_rate / 12 / 100 and n = remaining_term × 12.
When you make an extra payment, the new total payment is:
New Payment = Standard Payment + Extra Payment
The new number of months ($N_{new}$) required to pay off the remaining balance with this higher payment is calculated analytically using logarithms:
N_new = -log(1 - (Balance × r) / New Payment) / log(1 + r)
The time saved is the difference in years:
Time Saved = (n - N_new) / 12
The total interest saved is the difference between standard remaining interest and the new total interest under the early payoff plan:
Interest Saved = (Standard Payment × n - Balance) - (New Payment × N_new - Balance)
Step-by-Step Calculation Examples
Adding $300 Monthly Principal Extra
Accelerating a $250,000 balance at 6.5% interest with 25 years remaining by paying an extra $300 every month.
- loan_balance: 250000
- interest_rate: 6.5
- remaining_term: 25
- extra_payment: 300
- standard_payment: $1,688.02
- new_payment: $1,988.02
- standard_interest: $256,405.37
- time_saved: 7.4
- interest_saved: $85,738.77
Frequently Asked Questions
How do extra payments shorten my loan term?
Standard monthly payments pay down very little principal in the early years of a mortgage because most goes to interest. Extra payments go 100% toward the principal balance, directly reducing the compounding base of interest and speeding up payoff.
Should I make extra payments or invest the money?
It depends on your interest rate. If your mortgage rate is high (e.g., 6.5%+), paying it down offers a guaranteed return of 6.5% after taxes. If your rate is low (e.g., 3%), you might earn higher returns by investing the extra cash in a index fund or retirement account.
Is there a penalty for paying off a mortgage early?
Most modern residential mortgages do not have prepayment penalties, allowing you to pay extra at any time. However, it is always a good idea to confirm with your lender before setting up automated extra payments.