1. What is the Mortgage Balance Formula?

The mortgage balance formula calculates the remaining principal balance on a loan after a certain number of payments have been made. It accounts for both the principal and interest portions of your payments.

2. How Does the Calculator Work?

The calculator uses the mortgage balance formula:

Where:

• \( B \) — Remaining balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan term in months)
• \( p \) — Number of payments already made

Explanation: The formula calculates how much principal remains after a certain number of payments by accounting for both the interest and principal portions of each payment.

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining mortgage balance helps with refinancing decisions, planning early payoff, understanding home equity, and tax planning.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (as a decimal), total loan term in months, and number of payments already made. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual rate by 12 (for monthly payments). For example, 6% annual becomes 0.06/12 = 0.005 monthly.

Q2: Does this work for any loan type?
A: This formula works for standard fixed-rate amortizing loans. It doesn't apply to interest-only or adjustable-rate mortgages.

Q3: Why does my balance decrease slowly at first?
A: Early in a loan, most of each payment goes toward interest rather than principal. This is normal for amortizing loans.

Q4: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans. For variable rates, you'd need to recalculate with the current rate.

Q5: Can I use this for extra payments?
A: This calculates standard payments. For extra payments, you'd need a more advanced amortization calculator.