Methodology & formulas

Every number PayoffTool shows you comes from a transparent, industry-standard formula — not a black box. This page documents exactly how each calculator works, what it assumes, and where its limits are, so you can trust (and verify) the results.

How our calculators run

All calculations run entirely in your browser using JavaScript. Nothing you enter is sent to our servers or to any third party — there is no calculation data for us to store or sell. This also means results are instant and work offline once the page has loaded.

1. Mortgage Payoff Calculator

We use the standard fixed-rate amortization model. Your fixed monthly principal & interest payment is:

M = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ − 1 ]

P = loan principal (current balance)
r = monthly interest rate = annual rate ÷ 12
n = total number of monthly payments (years × 12)

We then build a month-by-month amortization schedule. Each month, interest is charged on the outstanding balance (balance × r), the remainder of the payment reduces principal, and any extra payment you enter is applied directly to principal that same month. For biweekly payments we model 26 half-payments per year (equivalent to 13 monthly payments), and for a one-time lump sum we reduce the principal in the month it is applied. The "time saved" and "interest saved" figures are the difference between the baseline schedule and your accelerated schedule.

2. Refinance Break-Even Calculator

We compute the new monthly principal & interest payment using the same amortization formula above, at your new rate and term. The monthly saving is your current P&I minus the new P&I. The break-even point — the month your accumulated savings finally exceed your closing costs — is:

Break-even (months) = Total closing costs ÷ Monthly payment saving

This comparison covers principal & interest only. It intentionally excludes property taxes, homeowners insurance, and PMI, because those are broadly similar before and after a rate-and-term refinance and would obscure the true cost-vs-saving trade-off.

3. Debt Snowball vs. Avalanche Calculator

We simulate both payoff strategies month by month on the same set of debts and the same total monthly budget:

Avalanche: after paying every minimum, all extra money targets the debt with the highest interest rate first. This minimizes total interest paid.
Snowball: extra money targets the smallest balance first. This clears individual debts fastest, which many people find more motivating.

When a debt is paid off, its freed-up payment "rolls forward" onto the next target debt — the mechanism that makes both methods accelerate over time. We report each method's total interest and total months to debt-free so you can weigh math against motivation.

Assumptions & limitations

Interest rates are treated as fixed for the life of the loan. Adjustable-rate loans will diverge from these estimates.
We assume on-time payments and no missed or partial payments.
Results exclude fees, escrow, PMI changes, prepayment penalties, and tax effects unless a field explicitly asks for them.
We assume your servicer applies extra payments directly to principal. Always confirm this with your servicer, as some apply extra funds to future payments instead.
Figures are rounded for display; internal calculations use full precision.

Accuracy & updates

The formulas above are the same ones used by lenders and financial institutions to amortize fixed-rate loans; you can reproduce our numbers with any spreadsheet's PMT function. We review the calculators whenever we change their logic and update the "last reviewed" date on each tool. If you ever find a discrepancy, please tell us — we investigate every report.

Disclaimer: Our calculators are educational tools that produce estimates, not financial advice. Your actual loan terms may differ. Always review your lender's official documents and consider consulting a qualified financial professional before making a decision.