Mortgage Payment
Calculate mortgage payment, total interest, and payoff cost.
About the Mortgage Payment
Your mortgage payment is mostly interest in the early years, which is why two loans with the same monthly payment can cost wildly different amounts overall. This shows both.
How to use it
- Enter the loan amount -- the price minus your deposit.
- Enter the annual rate your lender quoted.
- Enter the term, usually 30 or 15 years.
The formula
A mortgage uses the same amortisation formula as any other loan. What makes it feel different is the scale of n: 360 monthly payments, over which a modest-looking rate compounds into more than the house cost.
M = P × r(1 + r)n ÷ [(1 + r)n − 1]
P is the amount borrowed — the price minus your deposit, not the price. r is the annual rate divided by 12 and by 100. n is 360 for a thirty-year term, 180 for fifteen.
The split inside each payment is what matters. Interest for the month is the balance times r, so on a $400,000 loan at 6.5% the first payment carries $2,166.67 of interest against $2,528.27 paid — only $361.60 comes off the balance. That ratio inverts slowly, and it is why the first years of a mortgage build so little equity.
Worked examples
| Loan | Rate | Term | Monthly payment | Total interest |
|---|---|---|---|---|
| $400,000 | 6.5% | 30 years | $2,528.27 | $510,178 |
| $400,000 | 6.5% | 15 years | $3,484.43 | $227,197 |
| $400,000 | 7.5% | 30 years | $2,796.86 | $606,869 |
| $300,000 | 6.5% | 30 years | $1,896.20 | $382,633 |
The first two rows are the same debt at the same rate, and they differ by $282,981. Halving the term costs $956 more a month and saves more than a quarter of a million dollars, because interest is charged per month and you have eliminated 180 of them. Rows one and three are worth reading together too: one percentage point, on the same loan, is $96,691 — which is what makes shopping the rate worth a weekend.
Common mistakes
- Entering the purchase price instead of the loan. The formula wants what you are borrowing. On a $500,000 house with $100,000 down, the figure is $400,000. Entering the price inflates every result by the size of your deposit.
- Reading principal and interest as the real payment. Lenders collect property tax and homeowners insurance in escrow alongside it, and add mortgage insurance if your deposit was under 20%. The real bill is routinely $400 to $700 a month above the number here.
- Comparing 15- and 30-year loans on the monthly payment alone. The 30-year always looks affordable and always costs more — here, $282,981 more. Compare on total interest as well, then decide which constraint actually binds you.
- Assuming the rate is the whole cost. Points, origination and lender fees are paid up front and never appear in the payment. Two loans at identical rates can differ by thousands at closing, which is what APR exists to expose.
Terms explained
- Principal
- The outstanding balance. Interest is charged on this, so every dollar you knock off stops costing you for the rest of the term.
- Escrow
- An account your lender holds to pay property tax and insurance on your behalf. It is why the payment they quote exceeds the one calculated here.
- PMI
- Private mortgage insurance, normally required below a 20% deposit. It protects the lender, not you, and typically falls away once you reach 20% equity.
- Points
- Fees paid at closing to buy the rate down, each usually 1% of the loan for about 0.25% off the rate. Worth it only if you keep the loan long enough to recover the cost.
- Amortisation schedule
- The month-by-month table of how each payment splits between interest and principal. Early payments are mostly interest.
- Total interest
- Every dollar paid above the amount borrowed. On a 30-year loan it frequently exceeds the sum you borrowed in the first place.
Common questions
- Why is my real payment higher than this?
- Because lenders bundle property tax and insurance into escrow, and add PMI below a 20% deposit. This figure is principal and interest only — expect the full bill to run several hundred dollars a month above it.
- Is a 15-year mortgage better?
- It costs far less in total interest — $227,197 against $510,178 on a $400,000 loan at 6.5% — but the payment is $956 a month higher. Better only if that payment is one you can make in a bad year, not just a good one.
- What does the total interest number mean?
- Every dollar you pay above the amount borrowed, across the whole term. At 6.5% over 30 years it is larger than the loan itself, which is the single most useful fact on this page.
- How much difference does one percentage point make?
- On $400,000 over 30 years, going from 6.5% to 7.5% adds $268.59 a month and $96,691 over the term. Rate shopping is worth real money.
- Should I make extra payments?
- Early ones are worth the most, because the balance is largest and interest is charged on it. An extra $200 a month from the start of a $400,000 loan at 6.5% takes roughly five years off the term. Confirm the lender applies it to principal.
- What is the 20% deposit really for?
- Avoiding PMI, mainly, and reducing the amount borrowed. Both save money, but they are separate benefits — a 20% deposit is not a rule, it is the threshold at which one particular fee stops.
- Does refinancing reset my progress?
- A new 30-year term restarts the amortisation clock, so you return to paying mostly interest. A lower rate can still win, but compare total remaining interest against total new interest rather than comparing payments.
- Why did the payment barely move when I raised my deposit?
- Because the payment scales with the loan, not the price. An extra $10,000 down on a $400,000 loan at 6.5% saves about $63 a month — real, but smaller than most people expect, and worth weighing against holding that cash.