1. What is the Mortgage Balance Formula?

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

2. How Does the Calculator Work?

The calculator uses the mortgage balance equation:

Where:

• \( B \) — Remaining balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (term in months)
• \( p \) — Number of payments already made

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

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining mortgage balance helps with refinancing decisions, understanding home equity, and planning for early payoff.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (as a decimal), total loan term in months, and number of payments already made.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual rate to monthly?
A: Divide the annual percentage rate by 12 (months) and by 100 (to convert to decimal). For example, 6% APR = 0.06/12 = 0.005 monthly.

Q2: Does this account for extra payments?
A: No, this calculates the standard amortization schedule. Extra payments would require a different calculation.

Q3: Why does the balance decrease slowly at first?
A: Early payments are mostly interest due to amortization. Principal reduction accelerates over time.

Q4: Can I use this for other loans?
A: Yes, it works for any fully amortizing loan with fixed payments (car loans, personal loans, etc.).

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans, assuming all payments were made exactly on schedule.