#Mortgage pay off early calculator how to#

This is the regularity with which the lender applies the annual rate of interest to the principal's balance. Another useful indicator is the Annual Percentage Rate (APR), which takes into consideration the fees and other charges involved in taking out the loan. 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. If compounding occurs more often than yearly, the actual interest charged in a year will be greater than the advertised figure. Such factors include the function of compounding and it's frequency, which indicates how often the interest is accrued on the principal. 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. This is the yearly interest rate, which is a nominal rate. In such a case, the principal is paid off faster, so the interest charged becomes smaller.

It is important to note that the amortization term can be significantly shortened by extra payments. 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. This the interval over which the principal balance reaches zero. This is the amount of the money lent out, and constitutes the principal to be paid off over the agreed upon period.

#Mortgage pay off early calculator how to#

For more information regarding both even principal and balloon repayments, you may like to check out our loan repayment calculator.Īs 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: Still, it is worth to know that a loan might have another repayment structure that involves a different payoff mechanism. Therefore, we designed this mortgage payoff calculator to estimate an amortized type of mortgage. 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). For this reason, most mortgages are amortized loans. In general, the mortgage requires paying back an increasing amount of the principal, and a decreasing amount of interest, over the agreed term. In other words, a mortgage is a form of a personal loan that a financial institution provides specifically for the purchase of a house.

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.Įssentially, a mortgage consists of a loan amount (principal) and interest, which is the price of the loan paid to the creditor. If you consider suspending your repayment, you may apply our deferred payment calculator to see how loan deferment would affect your costs and schedule.įormally, 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 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. 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. 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. 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 each case, you will receive further details in the form of your total payment amount and the interest accrued. The Mortgage Payoff Calculator is a handy tool that allows you to follow the repayment schedule of your mortgage loan.