Mortgage Calculator

What this calculator is, and when to reach for it

Your mortgage payment is the same figure every month, but what it is quietly doing changes with every single one of them. That is the part nobody explains, and it is the part worth understanding. Every payment you make does two jobs at once: it pays back a slice of the principal, the money you actually borrowed, and it pays the interest the lender charges for lending it to you.

Here is the catch. Interest is always worked out on what you still owe, and you owe the most on the very first day. So your earliest payments are almost entirely interest, with only a sliver of principal underneath. As the balance falls, the mix slowly tips the other way, until the final payments are nearly all principal. That slow hand-off has a name, amortization, and it is the one idea worth carrying away from this page. It quietly explains almost everything else: why the early years build so little equity, why paying extra now matters far more than paying extra later, and why a long loan can cost more in interest than the property cost in the first place.

The number this page leads with is the principal and interest payment, often shortened to P&I. It is the pure, comparable cost of borrowing the money. The amount a lender actually takes from your account is usually larger, because most lenders also collect your property tax and home insurance in the same payment, hold that money in an escrow account, and pay those bills for you when they fall due. If your deposit was small, they may add mortgage insurance on top, and a flat or managed development adds service charges or association dues. Put the four main pieces together and you get PITI: principal, interest, taxes, and insurance.

You can switch all of those on through the optional fields to see the fuller monthly figure. The headline deliberately stays at P&I, though, because that is the only number that lets you put two loans side by side and judge them fairly. Local costs are real, but they are not what makes one loan better than another.

Two ways to use it, and picking the right one

In purchase mode, you enter the property price and your deposit, and the calculator works out the loan for you: simply the price less what you put down. Use this when you are shopping, comparing places, or testing how much of a deposit to find.

In existing loan mode, you skip the price entirely and enter the balance you already owe. This is the one you want when you are checking a loan you already hold, planning overpayments, or working out where you stand before looking at a remortgage.

Either way you set the interest rate, the length of the loan, and how often you pay. That last one is a quieter lever than it looks. Monthly, twice monthly, and fortnightly schedules do not just reshuffle the same money, they change how many payments land in a year and therefore how quickly the balance falls. Paying fortnightly is the sly one: twenty-six half payments add up to the equivalent of thirteen monthly payments rather than twelve, so you make a full extra payment each year almost without noticing. The worked examples below put real numbers against that.

One assumption to keep in view: this page models a fixed rate that never moves. If your rate can reset after an initial period, use the adjustable rate mortgage calculator instead, because this page would only ever show you the payment while the opening rate holds, and the whole point of a variable deal is what happens after it does not.

Where to go next

"What is the payment?" is only ever the first question. When you want to know how large a loan your income and existing debts can reasonably carry, start with the mortgage affordability calculator, or work backwards from a target price with the home affordability calculator. To see the full payment by payment schedule, and exactly what you will still owe in, say, year seven, open the amortization calculator.

To weigh a new loan against your current one, use the refinance calculator, then the refinance break-even calculator to find the month the switch finally pays for itself, and the mortgage comparison calculator to rank two loans over the years you actually expect to keep them.

To watch overpayments melt the balance, there is the extra payment calculator and the mortgage payoff calculator. To test how much cash to put in up front, the down payment calculator and the loan to value calculator. And if you are weighing whether to buy the rate down or switch to fortnightly payments, the mortgage points calculator and the biweekly mortgage calculator sit right alongside. Each one takes much the same numbers and asks a sharper version of the question.

Because these tools are used all over the world, the calculator works in whatever currency you choose and assumes no single country’s tax rules. Amortization is the same arithmetic everywhere. Only the local costs stacked on top of it differ, which is exactly why the headline figure stays on the part that travels.

How the payment is worked out

A fixed-rate payment comes from the standard amortization formula, the same equation behind any loan repaid in equal instalments:

M = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

M

the payment each period, which is what you are solving for

P

the principal, meaning the loan amount

r

the rate for one period: the annual rate divided by the number of payments in a year

n

the total number of payments across the whole term

Turning a yearly rate into a periodic one

The rate a lender quotes is annual, but you pay in instalments, so the formula needs the rate for a single period. For monthly payments that is the annual rate divided by twelve. A 6.5% loan uses r = 0.065 ÷ 12 = 0.00541667 per month, and a thirty year term uses n = 30 × 12 = 360. Change how often you pay and both numbers move together: fortnightly payments divide the rate by twenty-six and multiply the number of payments to match.

Why the early years feel like standing still

Each period the interest is simply the balance multiplied by the periodic rate, and whatever is left of your payment goes to principal. On a 350,000 loan at 6.5%, the first month’s interest is 350,000 × 0.00541667 = 1,895.83. Out of a 2,212.24 payment, only 316.40 actually reduces what you owe.

You are not being cheated. You simply owe the most at the start, so that is when the most interest accrues. But it does explain two things people find surprising: that selling in the first few years builds almost no equity from payments alone, and that a little extra paid early has an effect far out of proportion to its size.

Escrow sits outside the formula

Property tax, insurance, and service charges are not interest, so when you enter them the calculator does not run them through the equation at all. It spreads each one across your payments and adds it on top of principal and interest. That is the entire reason the figure here can look lower than the one on a lender’s statement: the statement usually bundles escrow, and a clean loan comparison does not.

Why extra principal works so well

An extra amount is applied straight to the balance after each scheduled payment. Because the next period’s interest is then charged on a smaller balance, every unit of extra principal saves you all the future interest that unit would otherwise have generated.

The effect compounds in your favour. Overpayments strip payments off the end of the schedule, where they would have been almost pure principal anyway, so the interest you avoid is large compared with the cash you put in.

Points, and which rate to type in

Some borrowers pay discount points up front, where one point costs 1% of the loan, to secure a lower rate. Whether that pays off depends entirely on how long you keep the loan, which is what the points calculator and the break-even calculator are for.

Whatever you do, enter the loan’s note rate, the rate the payment is actually built from, and not the APR. The APR folds certain fees into a single figure so that offers can be compared like for like. It is a comparison number, not a payment number, and it is usually a little higher, so using it would overstate what you owe each month.

How much do the inputs actually move it?

As rough intuition on a thirty year loan: the payment scales directly with the loan, so a 10% larger loan is a 10% larger payment. Stretching the term lowers the monthly figure but raises total interest sharply. And each extra percentage point of rate lifts the payment by very roughly a tenth. Small differences in rate matter far more across thirty years than they appear to on the day you sign.

Is clearing it early always the right move?

Not automatically, and it is worth being honest about that. An extra unit of principal earns you a guaranteed return equal to your mortgage rate. Pay down a loan at 6.5% and you have effectively made 6.5%, with no risk and no market to second-guess. That is genuinely attractive.

But the same money can only be spent once. Before overpaying, most of the arithmetic points the same way: clear higher-rate debt first, because card interest dwarfs a mortgage rate; keep an emergency cushion, because money sunk into a property is very hard to reach in a crisis; and take any employer retirement match on offer, which is usually a larger and more certain return than prepayment.

There is a subtler cost too. Money paid into the house is illiquid, and a recast or a remortgage is the only straightforward way to convert it back into a lower monthly payment. None of this makes overpaying wrong. It simply means the interest a calculator shows you saving is one side of a trade, not the whole of it.

What this page assumes

This calculator uses the standard fixed-rate repayment schedule, keeps full precision internally, and rounds currency only for display and export.

Each period applies interest, scheduled principal, then any allowed extra principal.

Worked examples, step by step

Take a 350,000 loan at a 6.5% annual rate over thirty years, so 360 monthly payments. Put those through the formula and the monthly principal and interest payment comes out at 2,212.24. Across the full term that is 796,405.71 paid in, of which 446,405.71 is interest. You repay more in interest than the amount you borrowed.

How one payment splits, at three points in the loan

The payment never changes, but what it is made of transforms completely. At the start, interest outweighs principal roughly six to one. By the last payment it is almost all principal. Notice the middle row: halfway through the loan in time, you are nowhere near halfway through the balance. After fifteen years of payments on a thirty year loan, over 253,000 of the original 350,000 is still outstanding.

Fifteen years against thirty

Finding about 837 more a month saves roughly a quarter of a million in interest. That trade, a higher monthly cost for a dramatically lower lifetime cost, is the entire decision a shorter term represents. Whether it is the right one depends on whether the higher payment leaves you enough room to live.

Three variations worth testing

Add 200 a month. Paying 2,412.24 instead clears the thirty year loan in 286 payments, which is 74 months, or just over six years, early. Total interest falls to 338,308.88, a saving of 108,096.83 for an extra 200 a month you would probably stop noticing within a year.

Pay fortnightly. Half of 2,212.24 is 1,106.12. Paying that every two weeks means twenty-six half payments a year, the equivalent of thirteen monthly payments instead of twelve. The loan clears in about 24.2 years rather than 30, saving roughly 102,808 in interest, without any single month feeling different.

Add the real costs. If property tax runs about 450 a month and insurance 130, your PITI outlay is nearer 2,792. With a deposit under a fifth of the price, mortgage insurance of, say, 146 a month pushes it to about 2,938. That is the figure to budget against, even though the loan comparison still belongs to the 2,212.24.

The vocabulary, on and around this page

Principal

The amount you borrowed and still owe, before interest. Every payment reduces it a little, barely at all at the start of a loan and quickly near the end.

Interest

The lender’s charge for the loan, worked out each period on the balance you still owe. Because the balance falls over time, the interest share of a fixed payment falls with it.

Note rate

The interest rate your payment is actually built from, stated on the loan agreement. This is the rate to enter in a payment calculator.

APR

Annual percentage rate: the note rate plus certain fees, expressed as one figure so offers can be compared. It is usually a little higher than the note rate and is not used to work out the payment.

Amortization

The process by which each payment splits between interest and principal, shifting steadily towards principal as the loan matures. An amortization schedule lists that split for every payment.

Term

How long you have to repay the loan, commonly fifteen, twenty, or thirty years. A longer term lowers the monthly payment but raises the total interest paid.

Periodic rate

The interest rate for a single payment period, found by dividing the annual rate by the number of payments in a year. It is the r in the amortization formula.

Escrow

An account a lender uses to collect and pay your property tax and insurance alongside the loan payment. It is reassessed periodically, so the amount collected can change.

PITI

Principal, interest, taxes, and insurance: the fuller monthly housing cost. Lenders often quote PITI, while a bare payment estimate shows only principal and interest.

Mortgage insurance

A premium many lenders require when the deposit is below about a fifth of the price. It protects the lender rather than you, and can usually be cancelled once you hold enough equity.

Down payment

The cash you pay up front, also called a deposit. A larger one shrinks the loan, lowers the payment, and can remove the need for mortgage insurance.

Loan to value

The loan expressed as a percentage of the property value. A lower loan to value generally earns better rates and avoids mortgage insurance.

Discount points

An optional fee paid up front to secure a lower interest rate, where one point costs one percent of the loan. Whether they pay off depends on how long you keep the loan.

Closing costs

One-off fees paid to complete a property purchase, such as valuation, legal, and arrangement fees. They are paid up front rather than added to the loan here.

Extra principal

Any amount paid above the scheduled payment and applied directly to the balance. It shortens the loan and reduces total interest.

Biweekly payment

Paying half the monthly amount every two weeks, which produces twenty-six half payments a year, the equivalent of thirteen monthly payments. The extra payment shortens the loan.

Recast

Re-amortizing a loan after a large lump sum, which lowers the payment while keeping the same rate and end date. Not every lender offers it, and a fee may apply.

Prepayment penalty

A fee some loans charge for repaying early or overpaying beyond a limit. Where it applies it can offset the interest saved, so it is worth checking the loan agreement.

Debt to income

The share of gross income that goes to debt payments. Lenders weigh it heavily when deciding how large a loan to offer.

Fixed and adjustable rates

A fixed rate never changes for the life of the loan, while an adjustable rate can reset after an initial period. This calculator models a fixed rate.

Common mistakes, and what this page will not do

• Entering the APR instead of the note rate. The APR is higher because it bundles fees, so using it overstates the payment. Enter the plain interest rate the payment is built from.
• Forgetting escrow entirely. Principal and interest alone can sit hundreds below the real bill. Add property tax, insurance, and service charges to see what actually leaves your account.
• Mixing yearly and monthly figures. An annual insurance premium typed into a monthly field throws the whole estimate off. Always match the period the label asks for.
• Treating an estimate as an approval. This is educational arithmetic, not a lending decision, a rate quote, or a pre-approval. A lender applies its own rules, checks, and pricing.
• Ignoring mortgage insurance on a small deposit. With a deposit below about a fifth of the price, expect an added monthly premium that the bare principal and interest figure never shows.
• Assuming fortnightly payments are free or automatic. The arithmetic does save interest, but some lenders charge to set it up, do not offer true fortnightly collection, or simply hold the half payments until a full one is due.
• Assuming taxes and insurance stay still. Escrow amounts are reassessed and usually climb, so a payment that fits comfortably today can drift upward even on a fixed rate loan.
• Comparing loans on the monthly payment alone. A lower payment can conceal a longer term and far more total interest. Weigh total cost and how long you will keep the loan, not just the monthly figure.
• Not earmarking overpayments as principal. Unless an extra amount is designated for principal, some lenders apply it to the next payment instead, and the interest saving quietly disappears.

What this calculator leaves out: This calculator does not work out mortgage insurance for you, predict rate changes on a variable loan, add closing costs to the loan, model taxes or tax relief, or apply any country’s specific lending rules. It gives a clean, comparable payment estimate. Confirm the specifics with a lender before acting on it.

Frequently asked questions