1. What is the Loan Payoff Calculator?

This calculator determines how quickly you can pay off your home loan by making additional monthly payments. It shows the reduced payoff time and total interest savings from extra payments.

2. How Does the Calculator Work?

The calculator uses an iterative approach to solve:

Where:

• \( n \) — Number of months until payoff
• \( P \) — Principal amount (USD)
• \( r \) — Monthly interest rate (decimal)
• \( \text{extra payments} \) — Additional payments (USD)
• \( PMT \) — Standard monthly payment (USD)

Explanation: The calculator applies your payments (standard + extra) each month, first covering interest then reducing principal, until the balance reaches zero.

3. Importance of Extra Payments

Details: Even small extra payments can significantly reduce your loan term and total interest. Early extra payments have the greatest impact as they reduce principal faster.

4. Using the Calculator

Tips: Enter your loan amount, interest rate, term, and planned extra payment. All values must be positive numbers. The calculator will show your accelerated payoff schedule.

5. Frequently Asked Questions (FAQ)

Q1: How much can extra payments save me?
A: Even $100 extra per month can save thousands in interest and cut years off a 30-year mortgage.

Q2: Should I pay extra principal or refinance?
A: Compare savings from extra payments versus refinancing costs. Often, extra payments provide better returns than refinancing to a slightly lower rate.

Q3: When is the best time to make extra payments?
A: The earlier in your loan term, the better. Early payments reduce principal faster, compounding your interest savings.

Q4: Are there loan types where extra payments don't help?
A: Some loans have prepayment penalties, but most conventional mortgages allow extra payments without penalty.

Q5: Should I pay extra or invest the money?
A: Compare your mortgage interest rate to expected investment returns. Paying off debt gives a guaranteed return equal to your interest rate.