Accelerated Mortgage Payoff Calculator

Accelerated Payoff Formula:

\[ \text{Payoff Months} = -\frac{\ln\left(1 - \frac{\text{Loan} \times r}{\text{PMT}}\right)}{\ln(1+r)} \]

Loan Amount:

Annual Interest Rate:

Monthly Payment:

Extra Monthly Payment:

Payoff Time:

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1. What is the Accelerated Mortgage Payoff Calculator?

The Accelerated Mortgage Payoff Calculator estimates how quickly you can pay off your mortgage by making additional payments beyond the required minimum. It calculates the reduced payoff time and potential interest savings.

2. How Does the Calculator Work?

The calculator uses the accelerated payoff formula:

\[ \text{Payoff Months} = -\frac{\ln\left(1 - \frac{\text{Loan} \times r}{\text{PMT}}\right)}{\ln(1+r)} \]

Where:

$ \text{Loan} $ — Original loan amount ($)
$ r $ — Monthly interest rate (annual rate ÷ 12)
$ \text{PMT} $ — Total monthly payment including extra payments ($)
$ \ln $ — Natural logarithm function

Explanation: This formula calculates the number of months required to pay off a loan when making fixed monthly payments, accounting for compound interest.

3. Importance of Accelerated Payoff

Details: Making extra mortgage payments can significantly reduce the total interest paid and shorten the loan term, potentially saving tens of thousands of dollars over the life of the loan.

4. Using the Calculator

Tips: Enter your current loan balance, annual interest rate, regular monthly payment, and any additional monthly payment you plan to make. All values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How much can I save with extra payments?
A: Even small extra payments can save thousands in interest and reduce your payoff time by several years, depending on your loan terms.

Q2: Should I pay extra principal or invest the money?
A: This depends on your mortgage interest rate vs. potential investment returns. Paying off mortgage provides guaranteed return equal to your interest rate.

Q3: Are there prepayment penalties?
A: Most modern mortgages don't have prepayment penalties, but check your loan documents to be sure.

Q4: How do I make extra payments?
A: Contact your lender to ensure extra payments are applied to principal, not future payments. Specify "principal only" when making payments.

Q5: What's the best strategy for extra payments?
A: Consistent monthly extra payments are most effective, but lump-sum payments (tax refunds, bonuses) can also significantly reduce payoff time.