Mortgage Calculator
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $3,577 | $20,695 | $316,423 |
| 5 | $4,636 | $19,636 | $299,555 |
| 10 | $6,410 | $17,861 | $271,284 |
| 15 | $8,864 | $15,407 | $232,189 |
| 30 | $23,438 | $833 | $0 |
Frequently Asked Questions
How are mortgage payments calculated?
Monthly mortgage payments are calculated using the amortization formula: M = P[r(1+r)^n]/[(1+r)^n-1], where P is the loan principal, r is the monthly interest rate, and n is the total number of payments. This formula ensures each payment covers both interest and principal so the loan is fully paid off by the end of the term.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage has higher monthly payments but saves you a significant amount in total interest and builds equity faster. A 30-year mortgage offers lower monthly payments, providing more flexibility in your budget. Choose based on your monthly cash flow, financial goals, and whether you prioritize lower payments or paying less interest overall.
What factors affect my monthly mortgage payment?
The three main factors are loan amount (home price minus down payment), interest rate, and loan term. A larger down payment reduces the loan amount and may help you avoid private mortgage insurance (PMI). Even small differences in interest rate can add up to tens of thousands of dollars over the life of the loan.
How can I reduce the total interest paid on my mortgage?
You can reduce total interest by making a larger down payment, choosing a shorter loan term, making extra principal payments each month, or refinancing to a lower interest rate when rates drop. Even one extra payment per year can shave years off your mortgage and save thousands in interest.
What is amortization in a mortgage?
Amortization is the process of paying off a loan through scheduled, equal payments over time. In the early years of a mortgage, most of each payment goes toward interest. As the loan matures, a larger portion goes toward reducing the principal balance. An amortization schedule shows this breakdown for every payment over the life of the loan.
Understanding Your Mortgage
This mortgage calculator uses the standard amortization formula to compute your fixed monthly payment: M = P[r(1+r)^n]/[(1+r)^n-1], where P is the loan principal, r is the monthly interest rate, and n is the total number of monthly payments. A 30-year mortgage spreads payments over 360 months, resulting in lower monthly payments but significantly more total interest compared to a 15-year term. The amortization table shows how early payments are mostly interest, while later payments go primarily toward principal. Understanding this breakdown helps you evaluate whether extra payments or refinancing could save you money over the life of your loan.