Mortgage Calculator

How it works

How is a monthly mortgage payment calculated?

A monthly mortgage payment calculator answers one question: given an amount borrowed, an interest rate and a term, what is the fixed sum you owe every month until the loan is gone? The standard amortization formula does it in one step.

The payment M comes from the principal P, the monthly interest rate r (your annual rate divided by twelve) and the number of monthly payments n:

M = P × r(1 + r)^n / ((1 + r)^n − 1)

Every payment is identical, which is what makes a fixed-rate mortgage predictable. What changes month to month is the split between interest and principal.

Why do early payments barely touch the balance?

Interest is charged on what you still owe. In month one you owe almost the whole loan, so almost the whole payment goes to interest. As the balance falls, the interest portion shrinks and the principal portion grows.

This is also why paying a little extra early is worth far more than paying the same amount late. Every extra dollar in the first years removes interest from every remaining month.

When do I finally pay more principal than interest?

Later than most people expect. On a $400,000 loan at 6.5% over 30 years, principal only overtakes interest in year 20 of the schedule — computed directly from this calculator's own amortization engine, not a rule of thumb. Shorten the term to 15 years at the same rate and the crossover arrives in year 5, because a shorter term front-loads far more principal into every payment from month one.

That gap is the real cost of stretching a loan: not just the extra interest total, but two-thirds of the term spent paying mostly interest before the balance meaningfully moves.

What does the loan term do to the total cost?

Term length is the single biggest lever on what a mortgage costs. A longer term lowers the monthly payment and raises the total substantially, because you are borrowing the same money for longer.

Here is the same $400,000 loan at 6.5%, over three common terms:

Stretching from 15 to 30 years drops the monthly payment by about $956 and adds roughly $283,000 in interest. Neither column is the right answer on its own — the 30-year payment may be the only one you can actually afford, and an affordable loan you keep beats an aggressive one you default on. But you should choose it knowing the price.

What is PMI, and how do I avoid it?

Private mortgage insurance protects the lender, not you, and it typically applies whenever your down payment is below 20% of the purchase price. It is not included in this calculator's numbers — see the PITI table below — and it typically costs somewhere in the range of 0.5% to 1% of the loan amount per year, though the exact rate depends on your credit score, loan type and insurer.

Two ways it goes away: it is automatically cancelled once your amortization schedule reaches 78% loan-to-value on most conventional loans, or you can request removal once you independently believe you have reached 80%, through paying down the balance, the home's value rising, or both. Ask your servicer for the exact rule on your loan — PMI terms vary by loan type, and FHA loans in particular often keep mortgage insurance for the life of the loan regardless of equity.

How much down payment do I actually need?

Less than the 20% figure most people assume, though 20% is still the number that avoids PMI entirely (see above). Conventional loans commonly go as low as 3% to 5% down, FHA loans as low as 3.5%, and VA loans (for eligible veterans) and USDA loans (for eligible rural properties) can go to 0% down.

The tradeoff is straightforward: a smaller down payment means a larger loan — a bigger principal in the formula above, so a higher monthly payment and more total interest — plus PMI until equity reaches 20%. A larger down payment shrinks all three at once, at the cost of tying up more cash upfront and, for many first-time buyers, waiting years longer to buy at all.

There is no universally right answer. A smaller down payment paired with buying sooner is a reasonable trade for buyers whose income and job security are solid but whose savings are still growing. Waiting to save a full 20% is the safer choice for buyers who would otherwise be stretched thin on cash reserves right after closing. Run both scenarios through this calculator — the loan amount is the one number the down payment actually changes here.

Does a biweekly payment schedule actually help?

Yes, and the mechanism is simpler than it sounds: paying half your monthly payment every two weeks means 26 half-payments a year — the equivalent of 13 full monthly payments instead of 12. That extra payment goes straight to principal, with the same early-years leverage described above.

Run the numbers through this calculator's own engine on the $400,000, 6.5%, 30-year example, spread as a monthly-equivalent extra payment: it pays the loan off about 5 years 10 months early and saves roughly $116,000 in interest. You do not need a special biweekly program to get this result — ask your servicer whether they accept extra principal payments, and if so, an extra one-twelfth of your payment added to every monthly payment gets you the same outcome without a third-party biweekly-payment service, some of which charge a setup fee for exactly this.

Will my extra payment actually go to principal?

Not automatically, and this is the most common way an extra payment gets wasted. Many servicers apply any amount above your scheduled payment toward next month's payment in advance, rather than reducing principal today — which does not shorten your term or reduce total interest the way this calculator assumes. Check your account settings for an option like "apply extra to principal," or call your servicer to confirm, and check your next statement to make sure the extra amount actually reduced your balance rather than prepaying next month's bill.

Does this work for adjustable-rate mortgages?

Not directly — every number here assumes one fixed rate for the whole term, stated plainly in the assumptions above. An adjustable-rate mortgage (ARM) starts at a fixed rate for an initial period, then resets periodically against a market index, so its true lifetime cost cannot be known in advance the way a fixed-rate loan’s can.

You can still use this calculator productively when comparing a fixed offer against an ARM: run the ARM’s initial rate through here to see its starting payment, then rerun the numbers at a meaningfully higher rate — a percentage point or two above the initial rate — to see what the payment could become after the first reset. If that higher figure would strain your budget, the fixed-rate loan is very likely the safer choice, even at a higher starting rate.

What does this calculator not include?

The main payment is principal and interest. Advanced options add the property tax, home insurance and HOA amounts you enter to a separate monthly housing estimate. The loan interest totals do not include those property costs:

Enter property-specific tax, insurance and HOA figures if you want the housing estimate. Budget separately for PMI, maintenance, utilities and closing costs. Extra principal payments are not included in the housing-cost line.

Getting a useful answer

• Use the amount you will borrow, not the sale price. A $500,000 home with a $100,000 deposit is a $400,000 loan.
• Use the quoted annual rate. The calculator converts it to a monthly rate internally, so enter 6.5 rather than 0.065 or 0.542.
• Compare offers at the same term. A lower rate over a longer term can still cost more overall.
• Rerun it when the rate moves. On a large balance, a quarter of a point is not a rounding error.
• Check whether your quote is the note rate or the APR. The APR folds in lender fees and typically runs a little higher — this calculator expects the plain note rate, the one printed on the loan itself.

Every figure recalculates in your browser. Nothing you type is sent to a server, so you can model a real loan with real numbers without handing them to anyone.

Primary reference for comparing mortgage costs

The Consumer Financial Protection Bureau loan-estimate explainer shows how U.S. mortgage documents separate loan terms, projected payments, taxes, insurance and closing costs. Use the lender’s document to verify the assumptions you enter here. This calculator is a fixed-rate model; it does not reproduce all closing costs, lender posting rules or variable-rate terms. Rules described for U.S. loans do not automatically apply in other countries.

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