Mortgage Calculator
Estimate your monthly payment on a fixed-rate mortgage, see amortization schedule, and understand total interest cost.
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Total purchase price of the property
Upfront payment percentage
Fixed annual mortgage rate
15 or 30-year fixed is most common in the US
Results
Assumes fixed interest rate with standard monthly reducing-balance amortization.
How mortgage calculations work
A mortgage is an amortizing loan secured by real property. Repayments follow the reducing-balance (French amortization) methodology, where each fixed periodic installment covers that month's accrued interest with the residual balance paying down loan principal:
1. Net Principal Borrowed: P = Home Purchase Price − Upfront Down Payment
2. Periodic Monthly Rate: r = Annual Interest Rate (%) ÷ 12 ÷ 100
3. Total Repayment Periods: n = Loan Term (Years) × 12
4. Monthly Payment: M = [ P × r × (1 + r)n ] ÷ [ (1 + r)n − 1 ]
5. Total Loan Interest: Total Interest = (M × n) − P
6. Total Property Outlay: Total Cash Outflow = Down Payment + (M × n)
Step-by-Step Worked Example (Default Scenario)
Consider a home purchased for $400,000 with a 20% down payment ($80,000) paid upfront, leaving a net loan of $320,000 at a fixed rate of 7.4% over 30 years (360 months):
| Milestone / Component | Mathematical Calculation | Computed Output | Strategic Impact |
|---|---|---|---|
| Home Purchase Price | Agreed Contract Price | $400,000 | Total gross real estate transaction value. |
| Down Payment (20%) | $400,000 × 20% | $80,000 | Instant equity buffer; avoids PMI requirement. |
| Net Principal Borrowed (P) | $400,000 − $80,000 | $320,000 | Total loan amount disbursed and amortized over 30 years. |
| Monthly Mortgage Payment | Amortization Formula (n=360, r=0.6167%) | $2,216 / Month | Fixed monthly payment for 30 years. |
| Month 1 Breakdown | Interest: $320k × 0.6167% = $1,973 Principal: $2,216 − $1,973 = $242 | 89.1% Interest / 10.9% Principal | Early payments are overwhelmingly interest — equity builds slowly at first. |
| Total Principal Repaid | Original Principal | $320,000 (40.1%) | Retires the entirety of debt obligation. |
| Total Interest Paid | ($2,216 × 360) − $320,000 | $477,622 (59.9%) | Interest exceeds the original loan amount over 30 years. |
| Total Housing Outlay | $80,000 (Down) + $797,622 (Loan+Interest) | $877,622 | 2.19× the original purchase price. |
Loan Term Trade-off: 15 vs 20 vs 30 Years
On the same $320,000 loan at 7.4% interest, choosing your loan term changes the total financing cost dramatically:
- 15-Year Fixed: Payment rises to $2,948/mo (+$733/mo), but total interest drops to $210,691 — saving $266,930 in interest and retiring debt 15 years earlier.
- 20-Year Term: Payment of $2,558/mo with total interest of $294,008 — saving $183,614 vs 30-year.
- 30-Year Fixed (Default): Lowest monthly payment at $2,216/mo, but total interest reaches $477,622 — more than the original loan amount.
The Equity "Crossover Point"
Because of reducing-balance amortization, your monthly payment shifts from interest-heavy to principal-heavy over time:
- Years 1–5: Over 80% of each payment goes toward interest on a 30-year mortgage. Home equity builds slowly.
- The Crossover Point: Around Month 238 (~Year 19.8 on a 30-year), monthly principal finally exceeds monthly interest for the first time.
- One Extra Payment Per Year: Making 13 payments instead of 12 each year cuts a 30-year mortgage down to about 26 years and saves tens of thousands in interest.
Assumptions & Real-World Exclusions
- PITI vs Principal & Interest: This calculator models pure Principal & Interest (P&I). A full PITI payment also includes property taxes, homeowner's insurance, and PMI — which together can add $300–$600/month on a typical US home.
- Fixed vs Adjustable Rate (ARM): This calculator assumes a fixed rate for the full term. On an ARM (e.g., 5/1 ARM), your rate is fixed for the initial period then adjusts annually, which can raise or lower your monthly payment.
- Closing Costs: US mortgage closing costs typically run 2%–5% of the loan amount (origination fees, title insurance, appraisal, prepaid escrow) and are paid out-of-pocket at closing — not included in this loan balance calculation.
Frequently asked questions
What factors determine my monthly mortgage payment?
How does down payment size impact my mortgage?
What is the difference between a 15-year and 30-year mortgage?
How does amortization work in a mortgage?
Can extra principal prepayments shorten my mortgage?
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Monthly Mortgage Payment
$2,216