1. What is the Mortgage Payoff Formula?

The mortgage payoff formula calculates how many months it will take to pay off a loan given a fixed monthly payment, current balance, and interest rate. This helps borrowers understand their repayment timeline.

2. How Does the Calculator Work?

The calculator uses the mortgage payoff formula:

Where:

• \( PMT \) — Monthly payment amount (USD)
• \( \text{Balance} \) — Current loan balance (USD)
• \( r \) — Monthly interest rate (decimal)

Explanation: The formula calculates the time needed to pay off a loan by determining how many periods (months) it takes for the present value of payments to equal the loan balance.

3. Importance of Payoff Calculation

Details: Knowing your payoff timeline helps with financial planning, assessing refinancing options, and understanding the impact of extra payments.

4. Using the Calculator

Tips: Enter your regular monthly payment amount, current loan balance, and monthly interest rate (annual rate divided by 12). All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What if my payment is too low to pay off the loan?
A: The calculator will show an error if your payment doesn't cover the interest (PMT ≤ Balance × r).

Q2: How do I convert annual rate to monthly?
A: Divide your annual percentage rate (APR) by 1200 (e.g., 6% APR = 0.005 monthly).

Q3: Does this account for extra payments?
A: No, this calculates payoff time for fixed regular payments only.

Q4: Why does my result show decimal months?
A: The calculation is precise, but you can round up to the next whole month for practical purposes.

Q5: Can I use this for other loans?
A: Yes, it works for any fixed-rate amortizing loan (car loans, personal loans, etc.).