Mortgage Calculator

What Is a Mortgage?

A mortgage is a loan commonly used to purchase a home or other real estate. The borrower repays the loan over an agreed period, usually through regular payments that include principal and interest.

The property generally serves as security for the mortgage. If the borrower does not meet the terms of the loan, the lender may have rights relating to the property, depending on local law and the loan agreement.

Mortgage products vary by country and lender. Interest rates, fees, taxes, insurance requirements, repayment structures and other terms can differ significantly.

How Is a Mortgage Payment Calculated?

A standard fixed-rate mortgage payment can be calculated using the amount borrowed, the monthly interest rate and the total number of monthly payments.

The calculation used by this calculator is based on a standard reducing-balance loan. The monthly payment is designed to repay the principal and interest over the selected term, assuming the interest rate remains unchanged.

The monthly payment shown by the calculator represents principal and interest. It does not automatically include property taxes, homeowners insurance, mortgage insurance, homeowners association fees or other property-related costs.

Mortgage Payment Formula

The standard fixed-rate mortgage payment formula is:

Where:

• M = monthly principal-and-interest payment
• P = mortgage principal
• r = monthly interest rate expressed as a decimal
• n = total number of monthly payments

The mortgage principal is generally the home price minus the down payment, assuming there are no other financed amounts.

How Does a Down Payment Affect a Mortgage?

A down payment is money paid toward the purchase price upfront. A larger down payment generally means you borrow less money.

Borrowing less can reduce the scheduled principal-and- interest payment and can also reduce the total interest calculated over the life of the mortgage, assuming the interest rate and term remain the same.

The amount of down payment that makes sense depends on factors such as available savings, lender requirements, other costs of buying a home and the borrower's financial circumstances.

How Does Mortgage Term Affect the Cost?

The mortgage term determines how long the loan is scheduled to be repaid.

These are general mathematical effects for the same loan amount and interest rate. Actual mortgage products can have additional terms that affect the final cost.

Principal vs. Interest

Each scheduled mortgage payment can be divided into principal and interest.

• Principal: reduces the amount still owed.
• Interest: represents the cost of borrowing money for that period.

At the beginning of a typical amortizing mortgage, the outstanding balance is at its highest. Because interest is calculated using that balance, the interest portion can represent a larger part of early payments.

As the balance decreases, the interest charged during each period generally decreases and a larger portion of the scheduled payment goes toward principal.

Mortgage Calculation Example

Consider a home with these assumptions:

• Home price: $400,000
• Down payment: $80,000
• Mortgage amount: $320,000
• Annual interest rate: 6.5%
• Mortgage term: 30 years

The calculator uses the $320,000 mortgage principal, converts the annual interest rate to a monthly rate and calculates the scheduled monthly principal-and-interest payment over 360 monthly payments.

You can enter these values into the calculator above to see the estimated payment and complete amortization schedule.

Costs That May Be Separate From the Mortgage Payment

A mortgage payment shown by a basic calculator is not necessarily the same as the complete monthly cost of owning a home.

Depending on the property, lender and location, additional costs may include:

• Property taxes
• Homeowners insurance
• Mortgage insurance
• Homeowners association or community fees
• Maintenance and repairs
• Lender and closing costs

These costs vary and are not included in the basic principal-and-interest calculation on this page.

How to Use the Mortgage Calculator

1. Enter the purchase price of the property.
2. Enter the amount you plan to pay as a down payment.
3. Enter the annual mortgage interest rate.
4. Enter the mortgage term in years.
5. Select Calculate Mortgage.

The calculator will show the estimated monthly principal-and-interest payment, loan amount, total interest, total payment and down-payment percentage.

The amortization schedule provides a year-by-year view of principal, interest, total payments and remaining balance.

Common Mortgage Calculation Mistakes

Looking only at the monthly payment

A lower monthly payment can result from a longer repayment period. Compare the total interest and total repayment as well as the monthly amount.

Forgetting the down payment

The amount borrowed is generally different from the home's purchase price when a down payment is made.

Ignoring additional housing costs

Taxes, insurance, maintenance and other expenses can affect the actual cost of owning a home.

Assuming the interest rate will never change

This calculator assumes the entered interest rate remains unchanged. Variable-rate mortgages can have different payments when the rate changes.

Treating the estimate as a lender quote

A calculator provides a mathematical estimate. A lender's official payment and loan terms should be used when making a borrowing decision.

Frequently Asked Questions

What is a mortgage?

A mortgage is a loan commonly used to finance the purchase of a home or other real estate. The property typically serves as security for the loan, subject to the applicable loan agreement and local law.

How is a mortgage payment calculated?

A standard fixed-rate mortgage payment is calculated using the mortgage principal, monthly interest rate and total number of monthly payments.

Does a larger down payment reduce the mortgage payment?

Generally, yes. A larger down payment means less money needs to be borrowed, which can reduce the scheduled principal-and-interest payment.

Does a longer mortgage term reduce the monthly payment?

Generally, yes. Spreading repayment over more months can reduce the scheduled monthly payment. However, the total interest paid can be higher.

What is mortgage amortization?

Mortgage amortization is the process of gradually paying down a mortgage balance through scheduled payments over the loan term.

Does this calculator include property taxes and insurance?

No. The basic calculation focuses on mortgage principal and interest. Property taxes, homeowners insurance, mortgage insurance and other costs are not automatically included.

Can I use this calculator for a home loan?

Yes. It can be used to estimate payments for a standard fixed-rate home loan using the assumptions you enter.

Why can my lender's payment be different?

Actual payments can differ because lenders may use different terms, payment dates, rounding methods, fees, insurance, taxes or interest-rate structures.

Does this calculator include closing costs?

No. Closing costs and other one-time purchase expenses are not included in the basic mortgage payment calculation.

Does a higher interest rate increase the mortgage payment?

With the same mortgage amount and loan term, a higher interest rate generally results in a higher monthly principal-and-interest payment and more total interest.

Important Information

This mortgage calculator is provided for educational and planning purposes. It estimates principal-and-interest payments using the assumptions entered by the user.

Actual mortgage costs can differ because of lender-specific terms, interest-rate changes, taxes, insurance, mortgage insurance, fees, payment timing, rounding and other costs.

Review the complete loan estimate or mortgage agreement from the relevant lender before making a financial decision.

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