1. What is the Prepayment Calculator?

The Prepayment Calculator helps homeowners determine their remaining loan balance when making additional payments. It's useful for planning mortgage payoff strategies and understanding the impact of prepayments.

2. How Does the Calculator Work?

The calculator uses the prepayment formula:

Where:

• \( RB \) — Remaining balance ($)
• \( PMT \) — Monthly payment amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( m \) — Number of remaining payment periods

Explanation: The formula calculates the present value of the remaining annuity payments, showing how much principal is left to pay.

3. Importance of Prepayment Calculation

Details: Understanding your remaining balance helps in financial planning, refinancing decisions, and evaluating the benefits of making additional principal payments.

4. Using the Calculator

Tips: Enter your regular monthly payment amount, the monthly interest rate (annual rate divided by 12), and the number of payments remaining. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How does prepayment affect my loan term?
A: Prepayments reduce your principal faster, which can shorten your loan term and reduce total interest paid.

Q2: Should I convert annual rate to monthly?
A: Yes, divide your annual interest rate by 12 (and by 100 if it's a percentage) to get the monthly decimal rate.

Q3: Does this account for irregular payments?
A: No, this assumes consistent monthly payments. For irregular payments, a more complex calculation is needed.

Q4: How accurate is this calculation?
A: It's accurate for fixed-rate loans with consistent payments. For adjustable-rate mortgages, results may vary.

Q5: Can I use this for other loans?
A: Yes, it works for any amortizing loan (car loans, personal loans) not just mortgages.