1. What is the Mortgage Balance Formula?

The mortgage balance formula calculates the remaining balance on a loan after a certain number of payments have been made. It accounts for both the principal amount and the interest accrued over time.

2. How Does the Calculator Work?

The calculator uses the mortgage balance formula:

Where:

• \( PV \) — Initial loan amount (USD)
• \( r \) — Periodic interest rate (decimal)
• \( k \) — Number of payments made
• \( PMT \) — Monthly payment amount (USD)

Explanation: The formula calculates how much of the original loan remains after accounting for payments made and interest accrued.

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining mortgage balance is crucial for financial planning, refinancing decisions, and understanding home equity.

4. Using the Calculator

Tips: Enter the original loan amount, interest rate (as decimal), number of payments made, and monthly payment amount. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert APR to monthly rate?
A: Divide the annual rate by 12 (for monthly payments). For example, 6% APR becomes 0.06/12 = 0.005 monthly rate.

Q2: Why does my balance decrease slowly at first?
A: Early payments are mostly interest. As the balance decreases, more of each payment goes toward principal.

Q3: How can I pay off my mortgage faster?
A: Making extra principal payments reduces the balance faster and saves on total interest paid.

Q4: Does this work for other loans?
A: Yes, this formula works for any amortizing loan with fixed payments (car loans, personal loans, etc.).

Q5: How accurate is this calculator?
A: It's mathematically precise for fixed-rate loans. For adjustable-rate mortgages, it's accurate until the next rate adjustment.