Mortgage Interest Calculator
Enter your loan amount, interest rate, and term to instantly see your monthly payment, the total interest you will pay over the life of the loan, and a year-by-year amortization schedule. Switch between fixed-rate and interest-only modes, add a down payment, and choose your currency. The results update as you type.
How mortgage interest is calculated
Mortgage interest is calculated on the outstanding principal balance each month. Your lender divides the annual interest rate by 12 to get the monthly rate, then multiplies that by whatever balance you still owe. In the early years of a fixed-rate mortgage, most of each payment goes toward interest because the balance is high. As you pay down the principal, the interest portion of each payment shrinks and the principal portion grows. This is called amortization. The standard formula for a fixed monthly payment is: Payment = P x r x (1 + r)^n divided by ((1 + r)^n - 1), where P is the loan amount, r is the monthly interest rate, and n is the total number of payments.
Fixed-rate vs. interest-only mortgages
A fixed-rate mortgage charges a constant interest rate for the life of the loan. Each monthly payment is the same dollar amount: part goes to interest and part reduces the principal balance. You build equity with every payment and will owe nothing at the end of the term. An interest-only mortgage works differently: you pay only the interest each month, so your balance does not shrink. Monthly payments are lower, but the full principal is still owed when the term ends, typically requiring a lump-sum payment, a sale, or a refinance. Interest-only products are often used by investors or high-income borrowers who expect to either sell before the term ends or invest the monthly savings at a higher return than the mortgage rate.
How extra payments reduce your interest cost
Because mortgage interest accrues on the outstanding balance, every extra dollar of principal you pay reduces the base on which future interest is calculated. Even a modest extra payment each month can cut years off a 30-year mortgage and save tens of thousands of dollars in interest. The benefit is largest early in the loan when the balance is highest. For example, on a 30-year fixed mortgage at 6.75%, adding an extra payment of around 10% of the monthly amount each month can shorten the term by several years and reduce total interest by a meaningful amount. Use the extra monthly payment field above to see how much you would save with your specific numbers.
Reading the amortization schedule
The amortization schedule shows, year by year, how much of your payments go to interest versus principal, and what your remaining balance will be at the end of each year. In the early years, interest claims a large share of each payment. By roughly the halfway point of a 30-year mortgage, the split is roughly even. In the final years, nearly all of each payment is principal. The schedule is useful for planning: it shows exactly when your balance will drop below certain thresholds, such as 80% of the home value (the point at which PMI can typically be cancelled), and how much equity you will have built at any given time.
Total interest as a share of repayments by rate and term
| Interest rate | 15-year term | 20-year term | 30-year term |
|---|---|---|---|
| 4.0% | 25% | 32% | 42% |
| 5.0% | 30% | 38% | 49% |
| 6.0% | 35% | 43% | 54% |
| 6.75% | 39% | 47% | 57% |
| 7.5% | 43% | 51% | 61% |
| 8.0% | 46% | 54% | 63% |
Illustrative figures for a $320,000 loan (typical after 20% down on a $400,000 home). Interest share rises with rate and term.
Frequently asked questions
What is the difference between interest rate and APR?
The interest rate is the annual cost of borrowing the principal, expressed as a percentage. APR (Annual Percentage Rate) is a broader measure: it adds most of the upfront fees and costs, such as origination fees and points, to the interest rate, then spreads that total over the loan term. APR is always equal to or higher than the stated interest rate. When comparing mortgages from different lenders, compare APRs rather than just rates for a fairer like-for-like view of total cost.
How is the monthly payment on a fixed mortgage calculated?
The standard formula is Payment = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the principal (loan amount), r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments (years times 12). This formula produces a constant payment where each installment covers the interest accrued that month and a growing slice of principal.
Can I reduce the total interest I pay without refinancing?
Yes. The most direct method is making extra payments toward principal. Even a small fixed addition each month can noticeably shorten the loan and reduce interest, because every extra dollar lowers the balance on which future interest is calculated. You can also make one extra full payment per year, or pay half the monthly amount every two weeks (biweekly), which results in 13 full payments per year instead of 12. Check with your lender that extra payments are applied to principal and that there is no prepayment penalty.
When does it make sense to choose an interest-only mortgage?
Interest-only mortgages suit borrowers who expect to sell the property before the term ends, or who have variable income and want lower required payments with the option to pay more principal when cash flow allows. They can also work for investors who expect returns from the property to exceed the mortgage rate. The key risk is that you build no equity through payments alone, so if property values fall you may owe more than the home is worth when the principal comes due.
How much does the loan term affect the total interest paid?
Substantially. A longer term means lower monthly payments but a much higher total interest cost because the balance stays elevated for more years. For example, at 6.75% on a $320,000 loan, a 30-year term results in roughly 57% of total repayments going to interest, while a 15-year term brings that down to about 39%. The monthly payment on the 15-year loan is noticeably higher, but the total outlay over the life of the loan is considerably less.
What is PMI and when can I stop paying it?
Private Mortgage Insurance (PMI) is required by most lenders when your down payment is less than 20% of the home value, because the loan-to-value ratio is higher and the lender takes on more risk. PMI typically costs 0.5-1.5% of the loan amount per year, added to your monthly payment. Under the Homeowners Protection Act in the United States, you can request cancellation once your balance drops to 80% of the original appraised value, and lenders must automatically cancel it at 78%. Use the amortization schedule to see which year your balance will cross the 80% threshold.