1. What is Mortgage Balance?

The mortgage balance represents the remaining principal amount owed on a loan after a certain number of payments have been made. It's crucial for refinancing, selling property, or understanding equity.

2. How Does the Calculator Work?

The calculator uses the mortgage balance formula:

Where:

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

Explanation: The formula accounts for the amortization of the loan, showing how each payment affects both principal and interest over time.

3. Importance of Mortgage Balance Calculation

Details: Knowing your remaining balance helps with financial planning, refinancing decisions, understanding home equity, and calculating potential prepayment penalties.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (divide annual rate by 12), 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 (APR) by 12. 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; principal reduction accelerates as the loan matures (amortization effect).

Q3: How does extra payment affect the balance?
A: Additional principal payments reduce the balance faster and decrease total interest paid over the loan's life.

Q4: What's the difference between balance and payoff amount?
A: Payoff amount may include accrued interest and fees, while balance is just the remaining principal.

Q5: Can I use this for other installment loans?
A: Yes, this formula works for any fully amortizing installment loan with fixed payments.