Mortgage Calculator

What your monthly payment is actually made of

The number the calculator gives you is one payment, but it is doing two jobs at once. Part of it pays the lender for the use of their money this month — that is the interest. The rest reduces what you owe — that is the principal. The split between the two changes every single month, and understanding that split is the difference between feeling ambushed by a mortgage and feeling in control of one.

Interest is charged on what you still owe. At the beginning you owe almost the whole loan, so almost the whole payment is interest. On a $300,000 loan at 6.5% over 30 years, the very first month’s interest is $300,000 × 6.5% ÷ 12 = $1,625.00. The payment is $1,896.20, so only $271.20 comes off the balance. Twelve months of that and you have paid $22,754.40 but reduced the debt by just $3,353.12.

That feels wrong the first time you see it. It isn’t a trick — it is arithmetic. And it reverses. Because the balance falls, the interest charged on it falls too, so a little more of each payment goes to principal than went last month. By the last year of a 30-year loan the position is exactly inverted: nearly all of every payment is principal, and the balance drops away quickly. The chart above shows that curve for your own numbers.

The formula

Every amortising loan — mortgage, car loan, personal loan, EMI — uses the same equation:

A = P × i / (1 − (1 + i)⁻ⁿ)

Symbol	Meaning
A	The fixed monthly payment
P	The amount borrowed: price minus down payment
i	The monthly interest rate: annual rate ÷ 100 ÷ 12
n	The number of monthly payments: years × 12

The formula answers one specific question: what single repeated amount, paid every month for n months, exactly clears the debt while covering the interest charged along the way? That is why the payment is an awkward number rather than a round one.

A worked example

Take a $300,000 home with $60,000 down, at 6.5% over 30 years.

1. Amount borrowed. $300,000 − $60,000 = $240,000
2. Monthly rate. 6.5 ÷ 100 ÷ 12 = 0.00541667
3. Number of payments. 30 × 12 = 360
4. The discount factor. (1.00541667)⁻³⁶⁰ = 0.143025, so 1 − 0.143025 = 0.856975
5. Apply the formula. A = ($240,000 × 0.00541667) ÷ 0.856975 = $1,300.00 ÷ 0.856975 = $1,516.96 per month

Over the full term that comes to $546,108.97, so the $240,000 you borrowed costs $306,108.97 in interest.

If you compare that total against another calculator you may see a difference of a dollar or two. That is because some tools multiply the unrounded payment ($1,516.9632…) by 360, while this one adds up the payments you would actually make — rounded to the cent, as a lender charges them — and adjusts the final instalment so the balance lands exactly on zero. The monthly payment is identical either way; only the 30-year total moves, and by a couple of units of currency. The interest is larger than the down payment, larger than most households’ total savings, and on a 30-year loan it is often more than the sum borrowed in the first place. That is a number worth knowing before you sign, not after.

Why paying a little extra changes so much

Anything you pay above the required amount comes straight off the balance. And because interest is charged on the balance, every unit you take off is a unit that never generates interest again for the rest of the term.

On that same $240,000 loan at 6.5%:

Extra per month	Loan cleared in	Time saved	Interest saved	Extra paid in
$0	30 years	—	—	—
$100	25 years, 2 months	4 years, 10 months	$58,352	$30,200
$200	21 years, 10 months	8 years, 2 months	$96,271	$52,400

Read the last row carefully. Paying $200 extra a month — about $6.60 a day — you put in $52,400 and avoid $96,271 of interest, finishing more than eight years early. Few decisions available to an ordinary household return that reliably.

Two cautions. Check your loan allows overpayment without a penalty; most do, some don’t. And keep an emergency fund first — money paid into a mortgage is very hard to get back out, and being unable to cover a hospital bill is a worse problem than owing interest.

How the term changes everything

Term	Monthly payment	Total interest	Total paid
15 years	$2,090.66	$136,318.09	$376,318.09
20 years	$1,789.38	$189,448.93	$429,448.93
25 years	$1,620.50	$246,148.03	$486,148.03
30 years	$1,516.96	$306,108.97	$546,108.97

$240,000 borrowed at 6.5%, calculated with the tool on this page.

Going from 30 years to 15 raises the monthly payment by $573.70 — a real strain on a real budget — but saves $169,790.88 in interest. The 30-year loan is not a worse deal because the lender is greedy; it costs more because you are borrowing the same money for twice as long.

The sensible approach for most households: take the term you can comfortably afford, then overpay when you can. The lower required payment stays as a safety net in a bad month, while overpaying captures most of the interest saving in a good one.

What this calculator does not include

Honest limits, because a number that pretends to be complete is worse than one that states its boundaries:

• Mortgage insurance (PMI). Usually required when the down payment is under 20%, typically 0.3%–1.5% of the loan each year, and usually removable once you hold 20% equity.
• Closing costs. Origination, valuation, legal fees, title and purchase taxes — commonly 2%–5% of the price, paid up front rather than monthly.
• Rate changes. This assumes a fixed rate. On a variable or adjustable loan, the payment changes when the rate does.
• Daily compounding. Some lenders, notably in the UK and parts of South Asia, calculate interest daily rather than monthly. The difference is small but it is not zero.

Property tax, home insurance and HOA fees are available as optional inputs, kept separate from the loan payment because they are costs of owning the property, not of borrowing. They do not stop when the mortgage ends.

Rules of thumb worth knowing

• The 28/36 guideline. Lenders often want housing costs under 28% of gross income, and all debt payments under 36%. Useful as a sanity check, not as a target to max out.
• 20% down avoids PMI in most US lending, and improves the rate you are offered almost everywhere.
• A one-point rate difference is worth more than it sounds. On $240,000 over 30 years, 5.5% instead of 6.5% saves $55,537 in interest. Shop the rate as hard as you shop the house.