1. What is the Principal Remaining Equation?

The Principal Remaining equation calculates how much of the original loan amount is still owed after making a certain number of payments. It accounts for both the compounding interest and the payments made toward the principal.

2. How Does the Calculator Work?

The calculator uses the Principal Remaining equation:

Where:

• \( P \) — Original principal amount ($)
• \( r \) — Monthly interest rate (decimal)
• \( n \) — Number of months payments have been made
• \( \text{payment} \) — Monthly payment amount ($)

Explanation: The equation calculates the compounded principal amount and subtracts the future value of all payments made to date.

3. Importance of Principal Calculation

Details: Knowing your remaining principal helps with financial planning, refinancing decisions, and understanding how much equity you have in your home.

4. Using the Calculator

Tips: Enter the original loan amount, monthly interest rate (annual rate divided by 12), number of payments made, and your monthly payment amount.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual interest rate to monthly?
A: Divide the annual rate by 12 (for percentage) or by 1200 (for decimal). For example, 6% annual = 0.005 monthly decimal.

Q2: Does this account for extra payments?
A: No, this calculates based on regular fixed payments. Extra payments would require a different calculation.

Q3: Why does my principal decrease slowly at first?
A: Early payments are mostly interest due to amortization. More of each payment goes to principal over time.

Q4: Can I use this for other loans besides mortgages?
A: Yes, this works for any amortizing loan with fixed payments (car loans, personal loans, etc.).

Q5: How accurate is this calculation?
A: It's mathematically precise for fixed-rate loans with consistent payments. Variable rates would require different calculations.