Mortgage Payment Calculator
This computes the principal-and-interest portion of a monthly mortgage payment from the loan amount, rate, and term. That is the part the amortisation formula actually determines, and it is usually a good deal less than the number that eventually leaves your bank account each month.
How to use it
- Enter the loan amount, which is the purchase price minus your down payment.
- Enter the annual interest rate and the term in years.
- Read the monthly payment, total interest, and total paid.
What the formula is doing
A fixed-rate mortgage is solved for a single constant payment that exactly retires the balance over the term. The standard annuity formula divides the annual rate by twelve to get a monthly rate, then computes the payment where the present value of all future payments equals the loan amount.
A worked example makes the scale of it clear. On $350,000 at 6.5 percent over 30 years, the payment is about $2,212. Over 360 payments that is roughly $796,000 paid against a $350,000 loan, so the interest alone comes to about $446,000 — more than the amount borrowed. Interest is not a fee on a mortgage; it is usually the largest single line item in the transaction.
The relationship between rate and payment is not linear, which is why small rate moves matter more than people expect. Dropping that same loan from 6.5 to 5.5 percent cuts the payment by roughly $224 a month and total interest by about $80,000. A single percentage point is worth more than most negotiations on the purchase price.
Why your early payments barely touch the balance
Each month, interest is charged on the remaining balance. Because the payment is constant, whatever is left after interest goes to principal — and early on there is very little left.
On the $350,000 example, the first payment splits roughly $1,896 to interest and $316 to principal. That ratio inverts slowly. It takes around 19 years before more than half of each payment is going to principal, and the balance after ten years of on-time payments is still about $287,000.
This is why extra principal payments early in the term are so disproportionately effective. A dollar of extra principal in year one removes every future interest charge that dollar would have generated over 29 remaining years. The same dollar in year 28 saves almost nothing. It is also why refinancing late in a term resets you to the front of that curve, which can cost more in total interest even at a lower rate.
What this figure leaves out
The output here is principal and interest only. The payment your lender collects is usually larger, and the gap is not small.
The commonly escrowed additions:
- Property taxes, which vary enormously by jurisdiction and are typically 0.5 to 2.5 percent of assessed value annually. On a $400,000 home at 1.5 percent that is $500 a month.
- Homeowners insurance, generally $100 to $250 a month, and considerably more in areas exposed to wind, wildfire, or flood.
- Private mortgage insurance, charged when the down payment is under 20 percent. Usually 0.5 to 1.5 percent of the loan annually, and on a conventional loan it can be removed once you reach 20 percent equity, which is worth tracking.
- HOA or condo fees, which are not escrowed but are a real monthly obligation lenders count against you.
The 15-year versus 30-year trade-off
Shortening the term raises the payment and cuts total interest dramatically, because interest accrues over far fewer months and shorter terms usually carry a lower rate.
On $350,000 at 6.5 percent, a 15-year term costs about $3,049 a month against $2,212 for the 30-year — roughly 38 percent more. Total interest falls from about $446,000 to about $199,000, a saving of $247,000.
The argument against is flexibility rather than arithmetic. A 30-year mortgage with voluntary extra principal payments can be paid off on a 15-year schedule while retaining the option to fall back to the lower required payment if income drops. You give up the slightly better rate on the shorter term in exchange for that option, which is often a reasonable trade.
At a glance
| Formula | Standard fixed-rate amortisation (annuity) |
|---|---|
| Includes | Principal and interest only |
| Excludes | Taxes, insurance, PMI, HOA fees |
| Transmitted | Nothing, calculation runs in the page |
Frequently asked questions
Why is my lender quote higher than this number?
Because this is principal and interest only. Escrowed property taxes, homeowners insurance, and PMI are commonly added, and together they often add 30 to 40 percent to the payment.
Why does so little of my early payment go to principal?
Interest is charged on the remaining balance, which is at its largest at the start. On a $350,000 loan at 6.5 percent, the first payment is about $1,896 interest and $316 principal.
How much does one point of interest rate matter?
A great deal. On $350,000 over 30 years, moving from 6.5 to 5.5 percent saves about $224 a month and roughly $80,000 in total interest.
Should I take a 15-year mortgage?
It saves enormously on interest but costs about 38 percent more per month. A 30-year loan with extra principal payments achieves a similar result while keeping the lower required payment as a fallback.
Read more
How loans actually work — Why your first payment is almost all interest, and why the term costs more than the rate.