Methodology

How the calculator works

By Sergio Ruiz · Last reviewed: October 8, 2026

This page explains every step the calculator performs, so you can check the results yourself. It uses the standard fixed-rate amortization formula that banks and loan servicers use; the only added piece is applying your extra payments to the principal and recalculating the interest each month.

1. Inputs

• Loan balance (P): the principal still owed.
• Annual interest rate: the nominal yearly rate, as a percentage.
• Term: the number of years remaining. The number of monthly payments is n = years × 12.
• Start date: the date of the first payment.
• Extra payments (optional): a monthly amount, a yearly amount applied in a month you choose, and/or a one-time amount on a date you choose. They can be combined.

2. The scheduled payment

The monthly rate is r = annual rate ÷ 12. The scheduled monthly payment is:

If the rate is 0%, the payment is simply P ÷ n. The scheduled payment never changes: extra payments shorten the loan instead of lowering the payment.

3. The month-by-month schedule

For each month the calculator does the following:

1. Interest = opening balance × r.
2. Scheduled principal = payment − interest.
3. Extra principal = any extra payment due that month (see below).
4. Closing balance = opening balance − scheduled principal − extra principal.

In the final month the payment is capped at what is still owed, so the balance ends at exactly zero and never goes negative.

4. When each type of extra payment is applied

• Monthly extra: added in every month, starting with the first payment.
• Yearly extra: added once per year, in the calendar month you select.
• One-time extra: added once, in the month of the date you select. If that date is before the loan start, it is applied in the first month.

Extra money is always applied to the principal in the same month it is paid, after the scheduled payment. Because interest is calculated on the opening balance, the earlier the money arrives, the more interest it removes.

Dates are calendar months. A loan that starts on the 31st continues on the last day of shorter months (for example, January 31 is followed by February 28 or 29).

5. The results you see

• Total interest saved = total interest of the scheduled loan − total interest of the loan with your extra payments.
• Payoff time saved = scheduled number of months − number of months with extra payments.
• New payoff date = the month of the last payment under your plan.

Amounts are displayed rounded to whole currency units; the calculation itself is not rounded month by month.

6. Worked examples

These figures were produced by the calculator's own engine, with a first payment on January 1, 2026. You can reproduce them with the formula above.

First month of the mortgage, step by step. Interest = $350,000 × 6.25% ÷ 12 = $1,822.92. Scheduled principal = $2,155.01 − $1,822.92 = $332.09. Closing balance = $350,000 − $332.09 = $349,667.91. Almost the whole first payment is interest, which is exactly why early extra payments are so effective.

7. Check it yourself

In a spreadsheet, the scheduled payment for the first example is =PMT(6.25%/12, 360, -350000), which returns 2,155.01 (in Spanish-language spreadsheets the function is PAGO). Compare the result with your own loan statement.

If your lender's figures differ slightly, the usual reasons are listed below.

8. Assumptions and limits

• The rate is fixed for the whole term. Adjustable-rate loans are not modeled.
• Interest accrues monthly on the opening balance. Lenders that accrue interest daily, or use a different day-count convention, will show small differences.
• Payments are assumed to be made in full and on time. Late fees, insurance, taxes and escrow are not included.
• Prepayment penalties are not modeled. If your contract has one, it reduces the savings shown here.
• The calculator assumes your servicer applies extra money to principal. Some servicers apply it to future payments unless you instruct otherwise.
• Timing. This calculator credits each extra payment in the same month as the scheduled payment. Other calculators may credit it a month later or count a final partial payment differently, so their results can differ slightly. We checked the engine against an independent calculation of the same method.
• Results are estimates for planning, not an offer, a quote or financial advice.

9. Testing and corrections

The calculation engine is covered by automated tests that compare the scheduled payment and total interest with the closed-form formula, check zero-interest loans, verify that principal paid always equals the loan amount, and check the date handling for loans that start on the 29th, 30th or 31st. When the formulas or rules change, this page is updated and its review date changes.