How to Calculate Early Mortgage Payoff

How to Calculate Early Mortgage Payoff

One of the amazing things about a home mortgage is that when you make a payment of just a little extra every month, you can save a lot of money by shortening the length of your loan. By paying down the principal of your loan each month, you will eliminate payments at the end of the loan, which will also eliminate the interest you owe. If you have a certain time frame in which you want to pay your mortgage off, you need to be able to calculate it.

Gather your information together to plan your budget. You will need the actual amount of loan still due and the amount of your monthly payment. When you are doing all your figuring, don't forget that your monthly payment may also include insurance and property taxes.

Figure out how much money you still owe on the loan. This would be called the principal on your payment sheet. The principal is the amount you want to pay down as soon as possible because every month the financial company charges you interest on the amount you still owe. Any payments you make are first applied to the interest and then to the principal.

Decide how soon you would like to pay off your loan and determine how many monthly payments that would include. For example, if you want to pay it off in 15 years instead of 30, 15 years of 12 payments would be 180 payments.

Take the principal still owed and divide it by the number of monthly payments you figured for an early payoff. The answer to this equation is the amount of money you would add to your existing mortgage payment.

Change the length of your loan by changing the number of monthly payments you want to pay off your loan to increase or decrease your monthly payment amount.


  • If you are familiar with advanced math, you can use the standard mortgage formula: M = P [ i(1 + i)n ] / [ (1 + i)n - 1] and change the variables for your calculations.

    Make sure you clearly mark any extra payments you send to your mortgage company as being for the principal balance. If you don't so so, they may be applied to the interest portion of your payment instead.