How to Calculate Mortgage Payoff: Balance, Time and Interest Saved
Your mortgage payoff is the balance left after the payments you have made. This guide shows the formulas for the payment, the remaining balance and the effect of paying extra.
The example loan
A $250,000 loan at 6.5% for 30 years. The monthly rate is 6.5% / 12 = 0.5417%, and there are 360 payments.
Step 1: the monthly payment
Payment = P x r / (1 – (1 + r)^-n), where P is the loan, r the monthly rate and n the number of payments. For the example this is $1,580.17 (principal and interest only, without taxes or insurance). In Excel: =PMT(6.5%/12,360,-250000).
Step 2: the payoff balance after k payments
Balance = P x (1 + r)^k – Payment x ((1 + r)^k – 1) / r. In Excel: =FV(6.5%/12,60,1580.17,-250000) for k = 60 payments.
| After | Remaining balance |
|---|---|
| 5 years (60 payments) | $234,027 |
| 10 years (120 payments) | $211,940 |
Early payments are mostly interest, so the balance falls slowly at first. After 5 years you have paid about $94,810 in total but reduced the loan by only about $15,973.
Step 3: what extra payments do
Add $200 a month to the same loan:
| Payment | Time to payoff | Total interest | |
|---|---|---|---|
| Standard | $1,580.17 | 30 years | $318,861 |
| With +$200 a month | $1,780.17 | about 22 years 1 month | about $221,243 |
That is roughly $97,600 of interest saved and almost 8 years removed. In Excel: =NPER(6.5%/12,-1780.17,250000) returns about 265 months.
Asking your lender for a payoff quote
The real payoff amount on a given day also includes interest accrued since your last payment and any fees. Ask your servicer for a written payoff statement before you send a lump sum.
Before you pay extra
- Check for prepayment penalties.
- Tell the servicer to apply extra money to principal.
- Compare against other uses of the cash, such as higher-interest debt.
Run your own numbers with the mortgage payoff calculator, the loan payoff calculator or the free loan amortization schedule for Excel.
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Frequently asked questions
How do I calculate how much I owe on my mortgage?
Use the balance formula with your original loan, monthly rate and number of payments made, or read it from your latest statement.
How much does one extra payment a year save?
It depends on the rate and term. Use the payoff calculator or the amortization schedule to test it on your loan.
Is the payoff amount the same as the statement balance?
Not exactly. The payoff amount includes interest accrued up to the payoff date and any fees.
Does the payment include taxes and insurance?
The formula gives principal and interest only. Escrow for taxes and insurance is added on top.
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