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 the original principal, interest rate, total loan term, and payments made.

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, accounting for both principal and interest portions of each payment.

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining mortgage balance is crucial for refinancing decisions, selling your home, or understanding your equity position. It also helps in financial planning and assessing prepayment options.

4. Using the Calculator

Tips: Enter the original loan amount (principal), 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 interest rate to monthly?
A: Divide the annual rate by 12 (e.g., 6% annual = 0.06/12 = 0.005 monthly).

Q2: Why does my balance decrease slowly at first?
A: Early mortgage payments are mostly interest; principal reduction accelerates over time.

Q3: How does extra principal payment affect the balance?
A: Extra payments directly reduce principal, lowering future interest and shortening loan term.

Q4: What's the difference between balance and payoff amount?
A: Payoff may include accrued interest and fees; this calculator shows principal balance only.

Q5: Can I use this for other amortizing loans?
A: Yes, this formula works for any fixed-rate, fully amortizing loan (car loans, personal loans, etc.).