An early or delayed loan payoff refers to the process of changing your loan repayment schedule. Early payoff means increasing your monthly payments to pay off the loan faster, while delayed payoff involves extending the loan term, resulting in lower monthly payments but potentially more interest paid over time.
1. Monthly Payment Formula:
2. Remaining Balance Formula:
Where:
Let's calculate the new monthly payment for a $200,000 loan at 4% annual interest, originally for 30 years, with 60 payments made and a new term of 20 years:
The green portion represents the current monthly payment ($954.83), while the red portion shows the extra monthly payment ($155.37) under the new loan terms.
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