Mortgage Payoff Calculator

Created by Tibor Pal, PhD candidate
Reviewed by Dominik Czernia, PhD and Jack Bowater
Last updated: Nov 01, 2022

The Mortgage Payoff Calculator is a handy tool that allows you to follow the repayment schedule of your mortgage loan.

In each case, you will receive further details in the form of your total payment amount and the interest accrued. You may also employ the device as a mortgage payoff calculator with extra payment if you provide an additional monthly payment or a single lump-sum prepayment. In both instances, you can set the related dates, which will provide you with a personalized accelerated mortgage payoff schedule that you can easily compare to the original plan. In this regard, you will receive more information, such as the new payoff date, the length of time until the payoff date, and how much faster you can pay off your mortgage in comparison to the original schedule.

The real value that this tool provides is the interactive graph, where you can follow both the original and the accelerated schedule, and the amortization table that you can set for monthly or yearly balances.

If you consider suspending your repayment, you may apply our deferred payment calculator to see how loan deferment would affect your costs and schedule.

What is a mortgage?

Formally, a mortgage is a legal agreement where a financial institution lends money to a borrower, with the property that money purchases used as collateral until the debtor fully repays the loan. The role of the collateral is to protect the lender in case of default, that is, the lender can take ownership of the property if the debtor is unable to make the periodic payments (installments) on the agreed due dates.

Essentially, a mortgage consists of a loan amount (principal) and interest, which is the price of the loan paid to the creditor. In other words, a mortgage is a form of a personal loan that a financial institution provides specifically for the purchase of a house.

In general, the mortgage requires paying back an increasing amount of the principal, and a decreasing amount of interest, over the agreed term. For this reason, most mortgages are amortized loans. From the perspective of the lender, a mortgage is a type of annuity, which is based on the concept of the time value of money (which you can read more about in our TVM calculator). Therefore, we designed this mortgage payoff calculator to estimate an amortized type of mortgage. Still, it is worth to know that a loan might have another repayment structure that involves a different payoff mechanism. For more information regarding both even principal and balloon repayments, you may like to check out our loan repayment calculator.

The mortgage payoff calculator - specifications

As you are now familiar with what a mortgage loan is, let's quickly review the calculator's specifications, and then learn how to use it:

  • Mortgage balance

This is the amount of the money lent out, and constitutes the principal to be paid off over the agreed upon period.

  • Amortization or loan term

This the interval over which the principal balance reaches zero. The longer its duration, the less you need to pay periodically, but the more you end up paying, since the bank charges interest for a longer period of time. It is important to note that the amortization term can be significantly shortened by extra payments. In such a case, the principal is paid off faster, so the interest charged becomes smaller.

  • Interest rate

This is the yearly interest rate, which is a nominal rate. Therefore it doesn't represent the real cost of the mortgage, since it doesn't incorporate additional factors that might alter the actual rate of interest charged on your mortgage. Such factors include the function of compounding and it's frequency, which indicates how often the interest is accrued on the principal. If compounding occurs more often than yearly, the actual interest charged in a year will be greater than the advertised figure. For a more accurate figure on how much interest you will have to pay, consider finding the Annual Percentage Yield (APY) or the Effective Annual Rate (EAR) of your loan. Another useful indicator is the Annual Percentage Rate (APR), which takes into consideration the fees and other charges involved in taking out the loan.

  • Compounding frequency

This is the regularity with which the lender applies the annual rate of interest to the principal's balance. The expression of compounding interest, however, is slightly misleading in this context. While savings accounts calculate compounding on both the interest earned and the principal, with amortization mortgages, the compounding effect is calculated solely on the current principal amount at the time of the calculation, and the entire interest is paid off with each payment.

How to use the mortgage payoff calculator?

We designed this tool in a super simple way: follow the three steps below, and you will get your results immediately:

  1. Set the variables in the section of the current mortgage specification: the mortgage balance (which in the case of an existing loan is the remaining balance, or in the case of a new loan, is the original loan value), mortgage term, interest rate, and compounding frequency.
  2. (Optionally) Set the parameters in the section of the extra payment specification. Here you can specify two kinds of additional payments and the date they will be paid:
  • extra monthly payment, the amount of money you add to the original monthly payment.
  • one-time or lump-sum prepayment, a single repayment on a given day.

Therefore, by setting the additional payments, the tool becomes an early mortgage payoff calculator extra payment.

It is essential to know that in any case, when you put additional money in your mortgage, keeping the loan term the same, the extra cash directly flows to the principal part of the loan. Thus it immediately reduces the balance that is the base of the interest payment. In this way, you can significantly reduce the charged interest, and also, you can pay off the loan earlier. Therefore, higher monthly payments or saving for bigger prepayments usually pay off at the end of the day.

The mortgage payoff calculator with an extra payment - how to read the results?

When you prove all of the above variables, three sections will immediately appear, which are the following:

  • Repayment details

In this section, you can read the summary of your mortgage. You can find, for example, the monthly payment amount, when the mortgage will be paid off, the total amount to be paid, and total interest charged. Besides, you can compare the accelerated mortgage schedule with the original one if you set an extra monthly payment.

  • Balances

In this dynamic chart, you can find a mortgage payoff schedule, which includes how the principal balance, total interest and total principal changes each year. If you set extra monthly payments, you will see both the original and the modified figure, giving you an excellent base for comparison.

  • Amortization Table

The amortization table sums up the schedule of the mortgage loan, providing the interest, principal, and closing balance. You can choose between two schedules:

  • Yearly amortization table
  • Monthly amortization table

Disclaimer

Remember, when taking a mortgage, you need to consider all the possible costs (i.e. taxes and insurances) that the bank charges or requires. It is particularly essential in case of long term mortgages combined with a low down payment.

The results of this calculator, due to rounding, should be considered as just a close approximation financially. For this reason, and also because of possible shortcomings, the calculator is created for instructional purposes only.

Tibor Pal, PhD candidate
Current mortgage specification
Mortgage amount
$
Interest rate
%
Mortgage term
yrs
mos
Interest capitalization method
Monthly (US & UK)
On the day of
Extra payment specification
Payment frequency
monthly
Extra payment
$
From the day of
One-time extra payment
$
On the day of
Accelerated pay-off options
Set an extra periodic or one-time payment to induce changes in your original repayment schedule.
Payment summary
Rep
chart of balances
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main background
With current schedule
Payoff dateNov. 07, 2047
Payment$527.84 monthly
Nº of payments300
Repayment term25 years
Total interest$58,351.05
Total payment$158,351.05