Payoff Mortgage Calculator

Reviewed by: David Chen, CFA

Use the Payoff Mortgage Calculator to determine how much time and money you can save by making extra payments toward your principal balance.

Payoff Mortgage Calculator

Total Time Saved:
Total Interest Saved:

Calculation Breakdown

Enter your values and click ‘Calculate’ to see the detailed steps.

Payoff Mortgage Calculator Formula

1. Calculate Original Monthly Payment (M) $$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$$ 2. Calculate New Term (nnew) with New Payment (M + Extra) $$n_{\text{new}} = \frac{-\ln\left(1 – \frac{P \cdot r}{M_{\text{new}}}\right)}{\ln(1+r)}$$ Source for Amortization Formulas: Investopedia

Variables

The calculator uses four core inputs to determine your mortgage payoff schedule and savings.

  • Initial Principal Loan Amount ($): The original amount borrowed for the mortgage.
  • Annual Interest Rate (%): The nominal interest rate applied to the loan, typically fixed.
  • Original Loan Term (Years): The initial length of the loan, usually 15 or 30 years.
  • Extra Monthly Payment ($): The additional amount you plan to pay each month on top of the required minimum payment.

What is a Payoff Mortgage Calculator?

A Payoff Mortgage Calculator is a financial tool designed to show homeowners the impact of making payments greater than the minimum required amount. This calculator essentially re-amortizes your loan with a larger monthly payment to determine the new, shorter loan term.

By entering a fixed extra amount—even as little as $50 or $100—you can instantly see the reduced number of years and months until the loan is fully paid off, alongside the substantial savings in total interest over the life of the loan. It is a critical planning tool for accelerating debt freedom.

How to Calculate Mortgage Payoff (Example)

Let’s use an example with $200,000 principal, 5% rate, 30 years, and $200 extra monthly payment.

  1. Determine the Monthly Rate and Total Payments: Monthly Rate $r = 0.05 / 12 = 0.004167$. Total original payments $n = 30 \times 12 = 360$.
  2. Calculate Original Monthly Payment ($M$): $M = \$200,000 \times \frac{0.004167(1+0.004167)^{360}}{(1+0.004167)^{360} – 1} \approx \$1,073.64$.
  3. Determine the New Monthly Payment ($M_{\text{new}}$): $M_{\text{new}} = \$1,073.64 + \$200 = \$1,273.64$.
  4. Calculate the New Loan Term ($n_{\text{new}}$): Using the new payment in the term formula, $n_{\text{new}}$ will be approximately 270 payments (22.5 years).
  5. Calculate Savings: The difference between the original term (360 payments) and the new term (270 payments) represents 90 months (7.5 years) saved, and the reduction in total interest paid is your total savings.

Frequently Asked Questions (FAQ)

Is it better to pay extra principal or refinance to a lower rate?

It depends on your current rate and fees. Refinancing can secure a lower rate but comes with closing costs. Paying extra principal has no fees and is almost always a beneficial action, especially if your current rate is above 4%.

How often should I make extra payments?

The most effective method is consistently adding an extra amount to your regular monthly payment, as calculated by this tool. Even one lump-sum payment per year can dramatically reduce the loan term.

Does the extra payment go directly to principal?

Yes, as long as you specify that the extra amount is for “principal reduction.” If not specified, the lender may hold it as a prepayment for future minimum payments.

What is the maximum extra payment I can make?

There is typically no limit, but always ensure you have a healthy emergency fund before dedicating large amounts to mortgage prepayment.

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