Methodology
How Our Mortgage Examples Are Calculated
This page explains the assumptions behind Simple Mortgage Plan examples so readers can evaluate results with confidence.
Core Formula
Most examples assume a fixed-rate amortizing mortgage where each monthly payment includes both interest and principal. Earlier payments are interest-heavy, and later payments shift toward principal.
When a strategy adds extra principal, the remaining balance drops faster, which usually reduces future interest and total payoff time.
Inputs Used In Examples
| Input | Meaning |
|---|---|
| Loan amount | Starting principal balance in the example. |
| Interest rate | Annual rate converted to a monthly rate for amortization steps. |
| Loan term | Usually 15, 20, or 30 years unless otherwise stated. |
| Extra principal | Additional payment assumed to reduce balance directly. |
| Timing | Whether extra amounts are monthly, annual, biweekly-equivalent, or one-time. |
What Results Do Not Include
- Escrow changes for taxes and insurance.
- Late fees, servicing constraints, or payment posting delays.
- Adjustable-rate mortgage behavior after rate resets.
- Tax impact, investment opportunity cost, or personalized risk tolerance.
How To Use The Numbers Safely
- Use examples to understand the concept and direction of impact.
- Validate your own loan balance, rate, and payoff rules from statements.
- Confirm with your servicer how principal-only payments are applied.
- Compare payoff speed against emergency savings, debt, and retirement priorities.
This methodology is simplified educational content and should not be your only decision input.