Mortgage Calculator

How the mortgage calculator works

With a fixed-rate mortgage you repay the loan with the same principal and interest payment (P&I) every month for the whole term. At the start most of each payment is interest; as the balance falls, a growing share goes to the principal. The calculator first works out the loan amount (home price minus down payment), applies the standard amortization formula used by lenders, then adds the monthly costs you enter, such as property tax, home insurance and HOA dues, to show what the home really costs you each month.

You can enter the down payment as a percentage of the price or as an amount: switching the unit converts the figure for you. The schedule below the results shows, year by year, how much of what you pay goes to interest and how much reduces the balance.

The mortgage payment formula

M = P × r ÷ (1 − (1 + r)⁻ⁿ)

• M: monthly principal and interest payment
• P: loan amount, that is the home price minus the down payment
• r: monthly interest rate, the annual rate ÷ 12 (6.5% a year = 0.065 ÷ 12 = 0.005417)
• n: number of monthly payments (30 years = 360)

The total monthly cost is M plus property tax, home insurance and any HOA, condo or mortgage insurance fees.

Example: a $400,000 home with 20% down

A 20% down payment of $80,000 leaves a $320,000 mortgage. At 6.5% over 30 years the principal and interest payment is $2,022.62 a month. Over 360 payments you pay back $728,142.36, so the loan costs $408,142.36 in interest: more than the amount you borrowed. With property tax of $350 and insurance of $120 a month, the total monthly cost is $2,492.62.

In the first year $20,694.69 of your payments goes to interest and only $3,576.72 to principal. The principal part of the payment overtakes the interest part only in month 233, during year 20. The same loan over 15 years costs $2,787.54 a month, about $765 more, but the total interest falls to $181,757.84: a saving of $226,384.52.

The rate matters as much as the term. On the same $320,000 over 30 years the payment is $1,918.56 at 6% and $2,128.97 at 7%: each half point adds roughly $105 a month.

How extra payments shorten your mortgage

Every extra payment goes straight to the principal, so the balance falls faster and less interest builds up afterwards. Adding $200 a month to the 30-year loan above pays it off in 23 years and 5 months, 79 months early, and saves $105,428.67 of interest. Before you overpay, check your terms: some lenders charge early repayment fees or cap penalty-free overpayments each year.

What goes into your monthly housing cost

• Principal and interest: the loan repayment itself, the figure the formula above calculates.
• Property tax: in the US and Canada it is a local tax on the home, and US lenders often collect it monthly through escrow together with the payment (PITI). In the UK council tax is billed separately and is not part of the mortgage.
• Home insurance: lenders usually require cover for the building, called homeowners insurance in the US and buildings insurance in the UK and Ireland.
• HOA, condo or strata fees: monthly charges for shared buildings and communities.
• Mortgage insurance: PMI in the US on conventional loans with less than 20% down, mortgage default insurance in Canada below 20% down, lenders mortgage insurance (LMI) in Australia. Enter a monthly premium in the HOA and other fees field.

Mortgages in the US, UK, Canada, Ireland and Australia

The maths is the same everywhere, but the products differ. In the US the 30-year fixed-rate mortgage is the norm and the 15-year term is the main alternative. In the UK and Ireland the rate is usually fixed for a few years (in the UK often 2 or 5) and then moves to the lender's variable rate unless you switch deal, while the total term is commonly 25 years or longer. A UK example: £250,000 at 4.5% costs £1,389.58 a month over 25 years and £1,183.14 over 35 years, but the longer term adds £80,045.21 of interest.

In Canada the amortization period (often 25 years) is separate from the term (often 5 years), after which you renew at a new rate. Fixed-rate Canadian mortgages compound interest semi-annually rather than monthly, so the real payment is slightly lower than this calculator shows. In Australia variable-rate home loans are common, terms are usually up to 30 years and an offset account can cut the interest you pay. Not sure which kind of rate suits you? Read our guide to fixed vs variable mortgages.

Tips to lower the cost of your mortgage

• Compare the APR, not only the rate (APRC in the UK and the EU): it includes most lender fees and points.
• Put more down if you can: with 10% down on the $400,000 home the payment at 6.5% is $2,275.44 instead of $2,022.62, and you may also pay mortgage insurance.
• Choose the shortest term you can comfortably afford, keeping a cushion for repairs and emergencies.
• Overpay when your lender allows it without penalties, even small amounts.
• Review your deal when rates fall or your fixed period ends: see how mortgage refinancing works.

What is the monthly payment on a $320,000 mortgage?

At 6.5% over 30 years the principal and interest payment is $2,022.62 a month and you pay $408,142.36 in interest over the life of the loan. Over 15 years at the same rate the payment rises to $2,787.54, but the total interest drops to $181,757.84. Property tax, insurance and HOA dues come on top.

What does PITI mean?

PITI stands for principal, interest, taxes and insurance: the four parts of a typical US mortgage payment when the lender collects property tax and homeowners insurance through an escrow account. Enter your tax and insurance as monthly amounts to see the full PITI figure as the total monthly cost.

How much should I put down on a house?

A bigger down payment means a smaller loan and a lower payment. In the US, 20% down on a conventional loan avoids private mortgage insurance (PMI); in Canada a down payment under 20% requires mortgage default insurance, and in Australia lenders usually charge lenders mortgage insurance (LMI) below a 20% deposit. On a $400,000 home at 6.5% over 30 years, 10% down gives a payment of $2,275.44 a month, against $2,022.62 with 20% down.

Is a 15-year or a 30-year mortgage better?

A 15-year mortgage costs much less in total but has a higher monthly payment. On a $320,000 loan at 6.5% the 15-year payment is about $765 a month higher, yet it saves $226,384.52 of interest. A 30-year loan gives you more breathing room each month, and you can still pay it down faster with extra payments.

How much do extra mortgage payments save?

Paying an extra $200 a month on a $320,000, 30-year mortgage at 6.5% ends the loan in 23 years and 5 months instead of 30 and saves $105,428.67 of interest. Check first whether your lender limits overpayments or charges a prepayment penalty.

Does this mortgage calculator include PMI?

Not automatically, because PMI depends on your lender, credit score and down payment. If your loan estimate shows a monthly mortgage insurance premium, enter it in the HOA and other fees field and it will be added to the total monthly cost.