What is being counted
This page answers a narrower question than the mortgage payment calculator. That page starts from an amount borrowed and a term and solves for the payment. This page starts from the payment you already have in mind and solves for the number of months. Both use the same monthly interest rule: the annual percent divided by 1,200, applied to the remaining balance in cents, then rounded half-up to the cent. Theeditorial policy states that rule for the payment formula. The payoff schedule follows it so the two pages do not invent a second way to charge interest.
The payment field is principal and interest only. It is not a mortgage payment that also holds taxes and insurance, and it is not an auto payment that already folded in tax and fees. If you want the amount financed on a vehicle first, the auto loan calculator builds that principal. You can then bring the payment back here. Nothing on this page is a payoff quote from a servicer, and nothing here is financial advice. Giuseppe Ilarda, the site owner, writes and checks these calculators. Thedisclaimer is the limit on what the result can mean.
A checked mortgage payment
The form opens on the site's checked loan: $200,000.00 at 6% with the contractual payment of$1,199.10. That payment is the half-up-to-the-cent result of the standard formula for 360 months, the same figure Microsoft's PMT function returns when the monthly rate is 6% divided by 12. Paid at that amount, this schedule reaches a zero balance in 360 months (30 years). Total interest is $231,677.04. The last payment is$1,200.14, which is $1.04 above the payment you typed.
That extra $1.04 is not a fee. Each month's interest is rounded to the cent, and the residue does not land on zero if every payment stays at $1,199.10 until the end. The mortgage page raises the final row to the payoff amount so the loan ends in month 360. This page does the same when the gap is no more than $2, which covers that checked residue. A larger gap keeps the payment you entered and continues. The balance on the last row is $0.00.
Extra principal, time, and interest
Add $200.00 of extra principal to that same payment. The schedule shortens from360 months (30 years) to 252 months (21 years). That is108 fewer months. Interest falls from $231,677.04 to$151,876.18, a difference of $79,800.86. Those figures match the extra-payment path on the mortgage calculator, because both paths use the same cent interest and the same extra-principal order: interest first, then principal, then the extra amount, and the last month collects only what is still owed.
The Consumer Financial Protection Bureau's explanation of paying down a mortgage is the same shape. Early payments are mostly interest because the balance is high. An extra amount applied to principal reduces the balance that later months use to compute interest. The CFPB also says a prepayment penalty, where a note has one, often applies to paying off a large balance in the first few years, and that small extra principal payments do not normally trigger it. This model cannot see a penalty. If the note has one, the interest figure here is not the cash you would pay to be done.
The unrounded period count
Spreadsheets answer a related question with NPER. Microsoft describes NPER as the number of periods for a constant rate and a constant payment. For a loan that ends at a zero balance, with payments at the end of the period, the count is the logarithm form: negative the log of one minus the monthly rate times the balance divided by the payment, divided by the log of one plus the monthly rate. On $5,000.00 at 18% with a$200.00 payment, the monthly rate is 0.015 and that expression is 31.56799 periods.
The cent schedule for those same inputs takes 32 months and charges$1,313.97 of interest. The fractional period and the whole-month schedule are both real. NPER does not round each month's interest to the cent, and it does not have to land on a calendar payment. The table on this page does. An extra $50.00 on that $200.00 payment shortens the cent schedule to 24 months (2 years) and cuts interest by$324.80. Eighteen percent is a round number chosen so the NPER figure can be checked. It is not a rate this site is quoting for a mortgage or a card.
What a servicer's payoff quote adds
The CFPB distinguishes the principal balance from the payoff amount. The payoff amount is what it takes to satisfy the loan on a stated day. It includes interest through that day. It can include fees you have been charged and have not paid. If you are paying off early, it can include a prepayment penalty. For a mortgage secured by a dwelling, a servicer that receives a request has to provide an accurate statement of the amount required to pay the loan in full as of a specified date. The number on this page is not that statement. It does not accrue interest by the day, and it does not know the day you would send the wire.
A 15-year versus 30-year comparison is a different decision. There the higher payment is required by the note. Here the extra amount is optional and can be set back to zero. A refinance, which replaces the note and usually has closing costs, is on thebreak-even page. Paying extra on the loan you have is not the same arithmetic as paying costs to get a new rate.
What this page leaves out
- Daily interest, late fees, and a servicer's payoff quote.
- Prepayment penalties, balloon payments, and rate changes.
- Biweekly drafts and extra amounts that are not the same every month.
- Taxes, insurance, and any judgment about whether the extra dollars should be sent.
If the payment you enter does not cover the first month of interest, the schedule stops. A balance that does not fall is not shown as a payoff. At a zero rate the payment simply chips away at principal, and interest stays at zero. That case is in the tests. It is still not advice about paying a particular loan early.