How mortgage payments are calculated

Your monthly payment depends on three numbers: the loan amount, the interest rate and the term. Small changes in any of them add up to large differences over 30 years.

By 孤獨的時空旅人 · Updated 2026-09-30

The formula behind the monthly payment

Most mortgages use equal monthly payments (an annuity). With loan amount P, monthly rate r (annual rate ÷ 12) and n payments, the payment is P × r ÷ (1 − (1 + r)^−n). Early payments are mostly interest; later payments are mostly principal, even though the amount stays the same.

Example: $300,000 at 6.5% for 30 years

The monthly principal and interest is about $1,896, and total interest over 30 years is about $382,633 — more than the amount borrowed. These figures come from the Mortgage Calculator with a fixed rate.

How much the rate matters

At 6.0% instead of 6.5%, the same loan costs about $1,799 a month — $97 less — and total interest falls to about $347,515, roughly $35,000 less. Comparing offers by rate, fees and points is often worth more than any other decision.

15 years or 30 years?

A 15-year term at the same 6.5% raises the payment to about $2,613, but total interest drops to about $170,398 — less than half. A shorter term costs more each month and much less overall; a longer term does the opposite.

What the payment does not include

The calculator shows principal and interest only. A real housing payment often adds property tax, homeowners insurance, mortgage insurance (PMI) and HOA fees, and adjustable-rate loans change after the fixed period. Use the result to compare scenarios, then ask your lender for an official estimate.

Tools used in this guide

Mortgage CalculatorMonthly payment, interest and scheduleCompound Interest CalculatorGrowth with monthly contributionsPercentage CalculatorPercent of, percent change and moreDate CalculatorDays between dates, add or subtract days

Frequently asked questions

Why is most of my early payment interest?

Interest is charged on the remaining balance, which is highest at the start. As the balance falls, more of each payment goes to principal.

What is the difference between equal payments and equal principal?

Equal payments keep the amount the same every month. Equal principal repays the same principal each month, so payments start higher and fall, and total interest is lower.

Does the calculator include taxes and insurance?

No. It calculates principal and interest with a fixed rate; add taxes, insurance and fees separately.

Is this financial advice?

No. The results are estimates for planning and comparison, not a loan offer or advice.

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