How the mortgage payment is calculated
The calculator first finds the loan amount as home price − down payment. It then computes the fixed principal-and-interest payment with the standard amortization formula:
M = L × r × (1 + r)n / ((1 + r)n − 1)
Lis the loan amount.ris the monthly rate (annual rate ÷ 12 ÷ 100).nis the number of monthly payments (term in years × 12; the term field accepts up to 50 years).
Property tax and home insurance, entered as yearly amounts, are divided by 12 and added as an escrow figure, giving the total monthly payment. The tool does not include PMI, HOA dues or closing costs.
Worked example
A 3,50,000 home with 70,000 down leaves a loan of 2,80,000. At 6.5% for 30 years, r = 0.065 / 12 and n = 360, so M is about 1,769.79. Add property tax of 3,600 and insurance of 1,200 a year (400 a month) and the total monthly payment is about 2,170. Over 30 years you pay about 3,57,125 in interest. In month one, the interest is 2,80,000 × 0.065 / 12 = 1,516.67 and only about 253 of the payment reduces the balance, which is why the yearly schedule starts so interest-heavy.
Term and rate comparison (loan 2,80,000)
| Rate and term | Principal and interest | Total interest |
|---|---|---|
| 5.5%, 30 years | 1,589.81 | about 2,92,000 |
| 6.5%, 30 years | 1,769.79 | 3,57,125 |
| 7.5%, 30 years | 1,957.80 | about 4,24,800 |
| 6.5%, 15 years | 2,439.10 | 1,59,038 |
A 15-year term raises the payment by roughly 670 a month compared with 30 years, but cuts the interest by about 1.98 lakh.
How the extra-payment field works
When you enter an extra monthly payment, the tool simulates the loan month by month: each month it charges interest on the current balance, and your payment of M + extra minus that interest reduces the principal. It runs the same simulation without the extra amount and shows the difference. For the example above, paying 200 extra each month ends the loan after 273 months (22 years 9 months) instead of 360. That saves about 1,01,283 in interest and 7 years 3 months. A 500 extra payment clears it in 205 months and saves about 1,73,584.
What to watch for
- Fixed rate only. Adjustable-rate loans change the payment when the rate resets, so these numbers hold only for the initial period.
- Missing costs. Private mortgage insurance usually applies to US loans with under 20% down, and HOA fees and maintenance sit outside this payment.
- Prepayment terms. Some lenders charge penalties or require you to flag extra money as principal; confirm that before relying on the savings figure.
- Currency. Amounts are currency-neutral. The schedule is shown per year, not per month.
The guide to how mortgage amortization works explains the schedule in detail. For other loan types, use the EMI calculator or the loan calculator, and see the take-home pay calculator to check what payment your income supports.