Tuesday, November 30, 2021

Household Math: Semiannual Mortgage Payoff

by Scott Bilker
Scott Bilker Scott Bilker is the founder of and author of the best-selling books, Talk Your Way Out of Credit Card DebtCredit Card and Debt Management, and How to be more Credit Card and Debt Smart. Receive the 5-Year Loan Spreadsheet when you subscribe to his email newsletter.

This question from a DebtSmart Reader, Margie: I purchased property for $27,515.00 at 7.5% for 8 years on a semiannual payment of $2318.00. The first year, three payments were made of $2,318.00; we have paid three years so far. This year, on our due date, we would like to pay off the mortgage. What will be the amount due? ($16,965; $18,695; $21,297; or $22,297) NOTE: Assume that the third payment in year one was made with the second payment.





I solved this problem by modifying my 30-Year Loan Worksheet to work with semiannual payments. There are only 15 payments, 16 in 8 years however, there is an extra payment, and therefore, this worksheet could easily be constructed by hand.

You can download the completed worksheet PDF here.

To construct the table by hand, the only formula you need is the FV=P*(1+i) where i=0.075/2 (because there are 2 semiannual periods in one year.)

Margie wants to know her amount due to payoff the loan completely at the next payment. This amount is the balance due, after making the prior payment, plus interest. In this case it’s simply $16,351.43+$613.18=$16,964.61.