Reviewed by David Chen, CFA | Expert Financial Analysis
Accelerate your journey to financial freedom. This ramsey mortgage payoff calculator helps you visualize how extra monthly payments can shave years off your mortgage and save you thousands in interest charges, following the proven principles of “Gazelle Intensity.”
Ramsey Mortgage Payoff Calculator
Enter values and click calculate to see your savings.
Ramsey Mortgage Payoff Formula
The payoff calculation uses the standard amortization formula applied iteratively:
$$M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]$$
Where $P$ is principal, $i$ is monthly interest, and $n$ is months. The Ramsey method subtracts the Extra Payment from the principal balance each month before calculating the next month’s interest.
Reference: Investopedia Amortization Guide | Ramsey Solutions
Variables:
- Loan Balance: The current amount you still owe the bank.
- Interest Rate: Your fixed annual percentage rate (APR).
- Remaining Term: How many years are left on your current mortgage schedule.
- Extra Payment: The additional principal-only payment you make monthly.
What is the Ramsey Mortgage Payoff Strategy?
The Ramsey Mortgage Payoff strategy, often associated with “Baby Step 6,” encourages homeowners to pay off their primary residence as quickly as possible. By maximizing extra principal payments, you reduce the total interest paid over the life of the loan.
This approach emphasizes psychological momentum and financial security. Owning your home outright eliminates your largest monthly expense, providing a massive buffer against economic downturns and allowing for aggressive wealth building.
How to Calculate Your Savings (Example)
- Determine your Current Monthly Payment (Principal & Interest).
- Calculate the Total Interest if you pay only the minimum for the remaining years.
- Add your Extra Payment to the monthly total.
- Recalculate the months required until the balance reaches zero.
- Subtract the new total interest from the original total interest to find your savings.
Related Calculators:
- Debt Snowball Progress Tracker
- 15-Year vs 30-Year Mortgage Comparison
- Gazelle Intensity Savings Calculator
- Emergency Fund Target Calculator
Frequently Asked Questions (FAQ)
Should I invest or pay off the mortgage? According to the Ramsey philosophy, you should invest 15% of your income first (Baby Step 4), then use any remaining surplus to attack the mortgage (Baby Step 6).
Is there a penalty for paying off early? Most modern mortgages do not have prepayment penalties, but you should always check your specific loan documents before starting.
How much does $100 extra a month save? On a $250,000 mortgage at 6%, an extra $100/month can save over $30,000 in interest and shave years off the term.
Does the extra payment go to interest? No, you must specify that extra payments are to be applied to the Principal to maximize the interest-saving effect.