How it works
A mortgage payment has two parts: the interest the bank charges and the principal you pay back. Early in the loan, most of your payment goes to interest; over time, more goes to principal. This calculator uses the standard amortisation formula lenders use, so the monthly payment it shows is the fixed payment that pays the loan off exactly over the term.
The payment shown here covers principal and interest only. Your real monthly housing cost is usually higher, because most lenders also collect property tax and home insurance with the payment (often called PITI), and some loans add mortgage insurance (PMI).
Formula
M = P × r(1 + r)^n ÷ ((1 + r)^n − 1), where r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments (years × 12).
What each input means
- Loan amount: The total amount you borrow — usually the home price minus your down payment.
- Annual interest rate: The yearly interest rate on the loan, as a percentage. A 6% rate means 0.5% per month.
- Loan term: How long you take to repay the loan. 30 years is the most common term in the US; 15 years means a higher monthly payment but much less total interest.
Worked example: $300,000 at 6% for 30 years
- Loan amount: $300,000
- Annual rate: 6% → monthly rate 0.5%
- Term: 30 years → 360 monthly payments
- Monthly payment: $1,798.65
- Total paid over 30 years: $647,514.57
- Total interest: $347,514.57 — more than the loan itself, which is why a lower rate or a shorter term saves so much.
Frequently asked questions
What does the monthly payment include?
Principal and interest only. Property tax, home insurance, and mortgage insurance (PMI) are usually extra — add them to get your true monthly housing cost.
Why is the first payment mostly interest?
Interest is charged on the balance you still owe. Early on the balance is large, so the interest part is large. As you pay the balance down, the interest part shrinks and more of each payment goes to principal.
Is a 15-year mortgage better than a 30-year one?
A 15-year loan has a higher monthly payment but far less total interest. On a $300,000 loan at 6%, a 15-year term costs about $2,531 a month but only about $155,683 in total interest, versus $347,515 on a 30-year term. Choose the term you can afford every month without strain.
Does this calculator include taxes and insurance?
No. Add your annual property tax and insurance, divide by 12, and add that to the monthly payment shown here for the full picture.