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 loan amount, 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 by accounting for both interest and principal 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 planning early payoff strategies.

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 percentage rate by 12 (months) and by 100 (to convert from percentage to decimal).

Q2: Why does my balance decrease slowly at first?
A: Early payments are mostly interest; principal reduction accelerates as the loan matures.

Q3: How accurate is this calculator?
A: It provides the theoretical balance assuming all payments were made exactly on time with no changes to terms.

Q4: Does this work for adjustable-rate mortgages?
A: Only if the rate hasn't changed. For ARMs, you'd need to recalculate after each rate adjustment.

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