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 compounding interest and payment schedule of the mortgage.

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 p payments by accounting for both the interest paid and principal reduction over time.

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining mortgage balance is essential for refinancing decisions, home equity calculations, and financial planning. It helps homeowners understand their current loan position.

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 valid (principal > 0, rate between 0-1, term > 0, paid ≤ term).

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual 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 slower at first?
A: Early payments are mostly interest; principal reduction accelerates over time.

Q3: How accurate is this calculation?
A: Very accurate for fixed-rate mortgages. For adjustable-rate mortgages, it's accurate until the rate changes.

Q4: Can I use this for extra payments?
A: This assumes regular payments only. Extra payments would require a different calculation.

Q5: What if I want to know my balance at a future date?
A: Simply enter the number of payments you will have made by that date.