Monthly payment, total interest and amortization.
M = P × [r(1 + r)^n] / [(1 + r)^n − 1]
A fixed-rate mortgage uses the standard loan amortization formula. The loan amount (principal) is the home price minus the down payment. Each monthly payment covers accrued interest first, with the remainder reducing the principal, so the balance reaches exactly zero at the end of the term.
The monthly interest rate r is the annual rate divided by 12. The number of payments n is the loan term in years multiplied by 12.
Loan Principal P = $400,000 − $80,000 = $320,000 Monthly rate r = 0.07 ÷ 12 = 0.0058333… Number of payments n = 30 × 12 = 360 Numerator: 0.0058333 × (1.0058333)^360 (1.0058333)^360 ≈ 8.11641 Numerator ≈ 0.0058333 × 8.11641 ≈ 0.047346 Denominator: 8.11641 − 1 = 7.11641 M = $320,000 × (0.047346 / 7.11641) M = $320,000 × 0.006653 M ≈ $2,129
Result: Estimated monthly payment: **$2,129** (principal & interest)
A monthly payment of $2,129 means you will pay that fixed amount every month for 360 months. Over 30 years, total payments equal roughly $766,440. After subtracting the $320,000 principal, you will pay approximately $446,440 in interest — illustrating why a shorter term or lower rate can save tens of thousands of dollars. Note: this figure covers only principal and interest. Your actual monthly housing cost will be higher once you add property taxes, homeowner's insurance, and (if your down payment is below 20%) private mortgage insurance (PMI).
Your calculated monthly payment covers principal (reducing your loan balance) and interest (the lender's charge for the loan). It does not include property taxes, homeowner's insurance, or HOA fees — costs that lenders bundle into an escrow account and collect on top of principal and interest.
In early years, the vast majority of each payment goes to interest. As the balance shrinks, more of each payment shifts to principal. This is called negative amortization in reverse — a standard amortizing loan is specifically structured so the payment never changes but the interest-to-principal ratio shifts each month.
A larger down payment lowers your principal, reducing both your monthly payment and total interest paid. Putting down at least 20% also eliminates PMI, which typically costs 0.5%–1.5% of the loan amount per year.
This calculator assumes a fixed-rate mortgage, where the interest rate — and therefore the payment — never changes. Adjustable-rate mortgages (ARMs) start with a fixed period, then reset periodically, making long-term payment projection more complex.
A 15-year term roughly doubles the monthly payment compared to 30 years on the same principal, but the total interest paid can be less than half that of a 30-year loan. Many borrowers choose 30 years for cash-flow flexibility and invest the difference.
Results produced by this calculator are mathematical estimates only. Actual loan offers from lenders may differ due to credit score adjustments, points, origination fees, lender overlays, or specific escrow requirements. Always confirm figures with a licensed mortgage professional or your lender's official Loan Estimate document.
A common guideline is the 28/36 rule: your housing payment should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. Divide your gross monthly income by 28% to estimate a maximum payment, then work backwards through the mortgage formula to find a corresponding home price.
The interest rate is the cost of borrowing the principal, used in the amortization formula. The APR (Annual Percentage Rate) is higher because it folds in lender fees, discount points, and certain closing costs spread over the loan term. Use the interest rate (note rate) in payment calculations; use the APR to compare true costs across loan offers.
One mortgage point equals 1% of the loan amount paid upfront at closing to 'buy down' the interest rate, typically reducing it by 0.25%. Paying points makes sense if you plan to keep the loan long enough for the lower monthly payment to recoup the upfront cost — calculate your break-even month by dividing the point cost by the monthly savings.
Paying extra principal reduces the loan balance faster, cutting total interest. It makes the most sense when your mortgage rate exceeds what you could reliably earn investing that money, or when nearing retirement and wanting a debt-free home. Compare your after-tax mortgage rate to expected investment returns to decide.
An amortization schedule is a month-by-month table showing how each payment splits between interest and principal, and the remaining balance after each payment. It reveals that early payments are mostly interest — for example, on a $320,000 loan at 7% for 30 years, the very first payment of $2,129 includes about $1,867 in interest and only $262 in principal.
The result covers principal and interest only — the two components of loan repayment. It does not include property taxes, homeowner's insurance, PMI, or HOA dues. Ask your lender for a full PITI (Principal, Interest, Taxes, Insurance) estimate.
A shorter term increases the monthly payment but dramatically reduces total interest paid. For example, on a $320,000 loan at 7%, a 15-year term produces roughly a $2,876/month payment vs. $2,129 for 30 years — but saves over $200,000 in interest over the life of the loan.
Conventional loans typically require 3%–20%. Putting down 20% avoids PMI. FHA loans allow as little as 3.5% down with mortgage insurance. VA and USDA loans may allow 0% down for eligible borrowers. A higher down payment always means a lower monthly payment and less total interest.
Yes. Simply change the loan term to 15 years. The formula and calculator work for any loan term. A 15-year mortgage will show a higher monthly payment but far less total interest compared to 30 years at the same rate.
No — this calculator shows the standard scheduled monthly payment assuming no extra payments. Making additional principal payments each month would pay off the loan faster and reduce total interest, but you would need an amortization schedule tool to model that scenario.
Lenders may quote a total monthly payment that includes escrow for taxes and insurance, adjust for PMI, charge points that affect the effective rate, or use slightly different rounding conventions. This calculator uses textbook amortization math as an estimate; always rely on your lender's official Loan Estimate for final numbers.
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