🏡 Mortgage Calculator
Calculate your monthly home mortgage payments, principal breakdown, and total interest cost.
What a mortgage actually costs, and where the money goes
A mortgage payment is not rent with a different name. Every month it splits into two parts that behave in opposite ways: interest, which is the lender's fee on the outstanding balance, and principal, which is the part that actually reduces your debt. At the start the split is brutally lopsided. By the end it has reversed completely.
On a $350,000 loan at 6.5% over 30 years, the monthly payment for principal and interest is about $2,212. In month one, $1,896 of that is interest and only $316 touches the balance. You will pay for nine years before the split reaches 50/50. Over the full term you will hand over roughly $446,000 in interest on a $350,000 loan, which is why the length of the term matters as much as the rate.
The formula behind the payment
Every fixed-rate mortgage in the world uses the same annuity formula. The calculator above applies it directly:
M = P × [ r(1+r)n ] / [ (1+r)n − 1 ]
M is the monthly payment, P is the amount borrowed, r is the monthly interest rate (the annual rate divided by twelve) and n is the number of monthly payments. A lender quoting you a different number is either adding costs on top or using a different compounding convention, and it is worth asking which.
What the payment does not include
The figure above is principal and interest only. The amount that actually leaves your account each month, often called PITI, usually adds three more things:
- Property tax, typically 0.3% to 2.2% of the home's value a year depending on the jurisdiction, collected monthly into an escrow account.
- Home insurance, commonly $100 to $250 a month, and more in flood or wildfire zones.
- Mortgage insurance, charged when the deposit is under 20% of the price. It protects the lender, not you, and typically costs 0.5% to 1.5% of the loan each year until the balance falls below 80% of the value.
Add them up and a $2,212 principal-and-interest payment can easily be $2,900 in practice. Budget from that number, not from the one the calculator gives you.
Rate versus term: which matters more
Both, but in different ways. The rate drives the monthly payment; the term drives the total interest. This is the same $350,000 loan under four combinations:
| Rate and term | Monthly payment | Total interest | Total repaid |
|---|---|---|---|
| 6.5% over 30 years | $2,212 | $446,400 | $796,400 |
| 6.5% over 15 years | $3,049 | $198,800 | $548,800 |
| 5.5% over 30 years | $1,987 | $365,300 | $715,300 |
| 5.5% over 15 years | $2,860 | $164,800 | $514,800 |
Shortening the term from 30 years to 15 adds about $837 a month and saves roughly $248,000 in interest. Shaving a full percentage point off the rate saves $225 a month on the 30-year loan. If you can only do one, halving the term is worth far more money, but it is also the one that most households cannot afford.
Overpaying, and why early payments count for so much
An extra payment made in year one removes interest for the remaining twenty-nine years. The same payment made in year twenty-five removes almost nothing. On the loan above, paying an additional $200 a month from the start cuts the term by about five years and ten months and saves roughly $112,000 in interest.
Before overpaying, check whether your lender applies the extra to principal or holds it as a prepayment of the next instalment. Only the first reduces the interest you pay. Some loans also carry early repayment charges in the first few years.
Deposit, loan-to-value and the price of a small deposit
Loan-to-value is the loan divided by the property price. A 20% deposit gives 80% LTV, which is the threshold where mortgage insurance usually disappears and where the best rates start. Going from a 10% deposit to a 20% deposit on a $350,000 home means finding another $35,000, but it removes insurance of roughly $200 a month and often cuts the rate by a quarter of a point, which together are worth more than $100,000 over the life of the loan.
Fixed versus adjustable
A fixed rate keeps the same payment for the whole term, so you are buying certainty. An adjustable rate starts lower and then resets against an index at set intervals, so you are taking the risk that rates rise. The question is not which is cheaper today, because the adjustable one almost always is; it is whether your budget survives the reset. If a two-point rise would make the payment unaffordable, the fixed rate is the cheaper of the two once you price the risk.
A worked example
A $420,000 home, 15% deposit of $63,000, so $357,000 borrowed at 6.25% over 30 years. Principal and interest come to $2,198 a month. Property tax at 1.1% adds $385, insurance adds $140, and mortgage insurance at 0.8% of the loan adds $238 until the balance drops below $336,000, which happens in year nine. The real monthly cost is $2,961 to start and $2,723 afterwards. Total interest over the full term: $434,300.
Frequently Asked Questions (FAQs)
How much house can I afford?
The common guideline is that housing costs should stay under 28% of gross monthly income, and all debt payments under 36%. On a $90,000 salary that is about $2,100 a month for housing, including tax and insurance. Lenders will often approve more than that; the guideline exists because the approval limit and the comfortable limit are not the same number.
Should I take a 15-year or a 30-year mortgage?
Take the 15-year term if the higher payment still leaves room for an emergency fund and retirement contributions. If it does not, take the 30-year and overpay voluntarily. That gives you most of the interest saving with the option to drop back to the lower payment in a bad year, which a 15-year contract does not.
What is the difference between the interest rate and the APR?
The interest rate prices the borrowing. The APR folds in origination fees, points and some closing costs, expressed as an annual rate, so it is the better number for comparing two offers. A loan with a lower rate and a higher APR is carrying fees you have not noticed yet.
Is it worth paying points to lower the rate?
A point costs 1% of the loan and typically cuts the rate by about 0.25%. On $350,000 that is $3,500 up front to save roughly $57 a month, so it breaks even after about five years. Worth it if you are confident you will keep the loan longer than that, not otherwise.
Can I get a mortgage with a 5% deposit?
Usually yes, through government-backed programmes or lender schemes, but it costs more in two ways: mortgage insurance for longer, and a higher rate because the lender is taking more risk. Run both scenarios in the calculator before deciding whether to wait and save more.
Does the calculator include closing costs?
No. Closing costs typically run 2% to 5% of the purchase price and are paid once, at completion, rather than monthly. Budget for them separately on top of the deposit.
What happens to my payment if I refinance?
Refinancing replaces the old loan with a new one, so the payment is recalculated from the current balance, the new rate and the new term. Resetting a loan that is ten years old back to a 30-year term lowers the payment but usually increases total interest, even at a lower rate. Run the remaining balance through the calculator with both terms before signing.