Mortgage Calculator
Monthly payment, total interest, and what an extra payment each month saves.
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Formula
How the calculation works
The payment is the standard annuity: the loan times the monthly rate over one minus the rate compounded down over the term. That gives a level payment that clears the loan exactly at the end. The total paid and the total interest are then just that payment times the number of months, and the interest is the larger part of it.
An extra payment is handled differently, by walking the loan month by month: interest is charged on the balance, the rest of the payment cuts the principal, and the balance falls faster. That walk is what produces the two figures the closed form cannot give -- how many months sooner it clears, and how much interest it saves.
Common mistakes
- Reading only the monthly payment. A lower payment over a longer term usually means far more interest overall.
- Comparing loans by rate alone when the terms differ. Two rates are only comparable at the same term.
- Sending the extra payment without telling the lender to apply it to the principal; otherwise it may be held as an advance instalment and save nothing.
When to use it
- Use it to see the true cost of a loan, and to test what an extra payment each month would save.
- It does not include insurance, taxes or fees, which lenders often bundle into the payment.
Worked example
3,000,000 at 9% over 20 years: 26,991.78 a month; 5,000 extra clears it 77 months sooner and saves 1.26 million in interest.
Common questions
What will the total interest be?
Over 20 years a 3,000,000 loan carries about 3,478,000 in interest -- more than the loan itself. That figure is why the term matters so much: halving the term roughly halves the interest on the same loan.
Does the extra payment really save?
Yes, and most of all early on. Early in the term most of the payment goes to interest, so the extra amount lands entirely on the principal. Paid late it does much less, so the same money does different work depending on when it is paid.
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