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 original principal, interest rate, total loan term, and payments made.

2. How Does the Calculator Work?

The calculator uses the mortgage balance formula:

Where:

• \( B \) — Current balance
• \( P \) — Original principal amount
• \( r \) — Monthly interest rate (annual rate ÷ 12)
• \( n \) — Total number of payments (loan 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 current mortgage balance is essential for refinancing decisions, home equity calculations, and financial planning. It helps homeowners understand how much they still owe on their property.

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. All values must be positive numbers.

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 from percentage to decimal).

Q2: Why does my balance decrease slowly at first?
A: In amortizing loans, early payments are mostly interest, with little principal reduction. This changes over time.

Q3: How accurate is this calculator?
A: It provides the theoretical balance assuming no extra payments. Actual balances may differ if you've made additional principal payments.

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

Q5: What if I've made extra payments?
A: The calculator won't account for extra payments. You'll need to subtract those separately from the calculated balance.