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Computation Framework
Amortized Payment Formula
Monthly payments are computed using the classical amortization equation:
M = P · [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1]Where:
• P = principal,
• r = nominal annual rate ÷ 12,
• n = total installments (years × 12).
Payment Component Calculations
Each period:
• Interest_t = Balance_(t−1) × r
• Principal_t = M − Interest_t
• Balance_t = Balance_(t−1) − Principal_t
Effect of Additional Principal Payments
Additional principal contributions:
• Accelerate balance reduction
• Reduce the interest base for subsequent periods
• Shorten amortization horizon
• Yield substantial lifetime interest savings
Frequency Normalization
All schedules are normalized to a monthly basis:
• Monthly = 1×
• Bi-weekly = 26 periods/year → 26/12 ≈ 2.17×
• Annual = 1 period/year
Standards & Sources
• Standard amortization mathematics
• CFPB policy framework
• Federal Reserve interest computation methods
Disclaimer: Actual lender calculations may deviate due to posting dates and policy differences.