| Scenario | Balance | Current Rate | Modified Rate | Term (yrs) | Modified P&I* |
|---|---|---|---|---|---|
| Standard reduction | $250,000 | 6.75% | 4.50% | 30 | ≈ $1,267 |
| Step rate (3y intro) | $250,000 | 6.75% | 3.75% → 4.75% | 30 | Varies by segment |
| With forbearance | $250,000 | 6.75% | 4.50% | 30 | Lower + balloon due |
The core payment estimate uses the standard amortizing-payment equation:
- P is the amortized principal (total principal minus forbearance).
- r is the monthly rate (annual rate ÷ 12).
- n is the number of remaining months.
When step rates are entered, the payment is recalculated at each segment start using the remaining balance and remaining term. If forbearance accrues interest, its monthly interest is added to the payment.
- Enter your current balance, rate, and remaining years.
- Add arrears and fees, then choose whether to capitalize them.
- Set the modified term and optional interest-only months.
- Use step rates only if your new rate changes over time.
- Enter forbearance to model a balloon due at maturity.
- Add escrow items to compare your full monthly outlay.
- Press calculate to see results above the form.
- Export CSV or PDF to keep a comparison record.
Payment change drivers
A modification usually targets the monthly principal and interest payment first. This calculator recomputes payment from the amortized principal, the monthly rate, and the remaining months. For example, $250,000 at 6.75% for 25 years is about $1,739 P&I, while 4.50% for 30 years is about $1,267 P&I, before escrow. Escrow items often add $200 to $800 monthly in practice.
Capitalization and term effects
Past-due amounts and fees can be capitalized into the new principal. If arrears are $4,500 and fees are $1,200, the modified principal increases by $5,700, which raises payment and total interest over time. Term extension can offset this by spreading repayment across more months, but it may increase lifetime interest.
Step-rate and interest-only modeling
Some programs use step rates, such as 3.75% for 36 months, then 4.75% thereafter. The calculator re-amortizes at each segment start using the remaining balance and months, so payments can jump at month 37. If you add 12 interest-only months, the payment equals interest during that phase, then rises when amortization begins. Extra principal payments reduce the amortized balance and can shorten payoff timing.
Forbearance and balloon risk
Forbearance reduces the amortized balance by setting aside a portion that is due later. A $20,000 forbearance can lower the monthly payment, but it creates a balloon at maturity. If interest accrues on the forbearance, monthly payment also includes that interest, which narrows the savings. Balloon amounts may come due at refinance, payoff, or property transfer, so plan liquidity.
Using exports for review
Use the CSV export to document inputs, the first-year snapshot, and the summary metrics you discussed with a counselor or servicer. The PDF export creates a clean comparison page for file retention. Pair exports with the graph to explain when payments change and how balance declines. Review assumptions carefully, then rerun scenarios to test different rates, terms, and forbearance amounts.
What does the modified P&I figure represent?
It is the principal-and-interest payment for month one of the modified schedule. If you use step rates or interest-only months, later payments can change as the rate or phase changes.
Should I capitalize arrears and fees?
Capitalizing rolls unpaid arrears and approved fees into the new principal. This can avoid a large immediate payment, but it usually increases total interest because you repay that amount over many months.
How does forbearance affect my payment?
Forbearance sets aside part of the principal as a balloon due later. Your amortized balance is smaller, so payment can drop. If the forbearance accrues interest, monthly payment also includes that interest.
Why do payments change with step rates?
When the rate changes, the calculator re-amortizes the remaining balance over the remaining term at the new rate. This can raise or lower the payment at the start of each rate segment.
What does interest-only mean here?
During interest-only months, you pay interest on the amortized balance, plus optional interest on forbearance. Principal does not reduce unless you add extra principal, so the later amortizing payment is typically higher.
How accurate are the totals and interest estimates?
They are planning estimates based on your inputs and standard amortization math. Servicers may use different day-count methods, escrow rules, rounding, or program-specific formulas, so confirm final terms with your servicer.