Methodology
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Payment formula
The regular payment is the standard fixed-rate amortization formula: P × r / (1 − (1 + r)−n), where P is the loan amount, r is the monthly rate (APR ÷ 12) and n is the number of monthly payments. With a 0% rate the payment is P ÷ n.
Extra and lump sum payments
Each period, interest is calculated on the current balance. The scheduled payment plus any extra amount is subtracted, and the remainder reduces principal. A lump sum is applied in the month you choose. The final payment is capped at the remaining balance.
Biweekly payments
We model 26 payments per year of half the monthly payment, with interest accruing at APR ÷ 26 per period and each payment applied when received. Lenders that hold funds and apply them monthly will produce smaller savings.
Limits
Results exclude property tax, insurance, escrow, fees and day-count conventions. Compare with your lender's amortization schedule before making decisions. We test the formulas against known reference values, for example a $300,000, 30-year, 6.5% loan has a payment of $1,896.20.
This site is for education and is not financial advice.