# Computing mortgage payments formula

### Computing mortgage payments formula -

## Article provided by Fintactix

Repayment of a mortgage loan requires that the borrower make a monthly payment back to the lender. Each monthly payment typically covers some portion of the loan principal, plus monthly interest on the outstanding balance. Loan payments are amortized so that your monthly payment remains the same during the repayment period, but the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases. Mortgage payments can also include amounts for property taxes, homeowner's insurance and monthly homeowner's association dues into an escrow account, managed by your lender. When those items are due, your lender will make the payment to the tax authority, insurance company or homeowner's association.

Use this calculator to calculate a mortgage payment.

Figuring out what you’ll pay monthly for your mortgage is easy. Just fill in the details, using the mortgage calculator above, to get an estimate of your monthly mortgage payment.

### Estimated Home Value:

If you are buying a house, enter the price of the property you are considering. If you’re refinancing your home loan, enter your home’s current value.

### Down Payment:

If you are buying a house, enter the amount of your down payment. If you are refinancing, enter the amount of equity you have in the property.

Equity = Estimated Home Value - Present Loan Balance

### Loan Amount:

This will automatically calculate for you based on your estimated home value and down payment amounts

Loan Amount = Estimated Home Value - Down Payment

### Interest Rate:

Enter the interest rate you estimate you will pay on your mortgage loan. Your interest rate can vary by the type of mortgage you choose, the term of your loan and the rate for which you qualify. If you are wondering about today’s interest rates, or would like to start the preapproval or application process, contact a mortgage loan officer.

### Term:

This is the number of years it will take to pay off your mortgage. Typically, a mortgage loan is either a 15- or 30-year term, but there are other options. If you are refinancing your home to a shorter or longer term, you can adjust the term length and see the difference it will make to your monthly mortgage payment. *Paying additional dollars each month on your mortgage principal may reduce the length of your term.*

### Annual Property Tax:

Property taxes vary not only by state, but by county, too. You can estimate your annual property taxes by taking the assessed value of your home and multiplying it by your local property tax rate.

For example, if you want to know the amount of your annual property tax for a $100,000 house in Omaha, Nebraska, you would multiply $100,000 by the Omaha property tax rate of 2.38% for a total of $2,388.00. To estimate the property tax in your city/town and state, visit this website.

### Annual Property Insurance:

The premium for your annual property insurance can vary depending on your location and the insurance company that underwrites your policy.

## How do mortgage lenders calculate monthly payments?

#### Tip

The total monthly payment you send to your mortgage company is often higher than the principal and interest payment explained here. The total monthly payment often includes other things, such as homeowners insurance and taxes. Learn more.

### Fixed-rate mortgage

A typical fixed-rate mortgage is calculated so that if you keep the loan for the full loan term – for example, 30 years – and make all of your payments, you will precisely pay off the loan at the end of the loan term. Learn more about how this works.

The payment depends on the loan amount, the loan term, and the interest rate. You can use our calculator to calculate the monthly principal and interest payment for different scenarios.

### Balloon loan

A balloon loan has a much shorter loan term than a regular mortgage – typically only five years – but the monthly payments are calculated as if the loan was going to last for a much longer time, typically 30 years. Because the monthly payments aren’t high enough to pay off the full loan, the remaining loan balance is due as one large final payment (known as the “balloon” payment) at the end of the loan term.

So, for example, if you had a mortgage loan of $100,000 for 30 years at an interest rate of four percent, your monthly principal and interest payment would be $477 per month. With a regular 30-year loan you would make this payment for 30 years. With a five-year balloon loan you would make this payment for five years and then owe the balance of the loan – or $90,448 – at the end of the fifth year.

### Adjustable-rate mortgage (ARM)

If you have an adjustable-rate loan, your initial payments are calculated assuming that your initial interest rate remains the same for the entire loan term.

When your interest rate adjusts, your payment will typically (though not always) be re-calculated based on the new interest rate and the remaining loan term.

### How to get help

If you’re behind on your mortgage, or having a hard time making payments, you can call the CFPB at (855) 411-CFPB (2372) to be connected to a HUD-approved housing counselor today. You can also use the CFPB's "Find a Counselor" tool to get a list of U.S. Department of Housing and Urban Development (HUD)-approved counseling agencies in your area.

If you have a problem with your mortgage, you can submit a complaint to the CFPB online or by calling (855) 411-CFPB (2372).

## Mortgage Interest Calculator Canada

When you make a mortgage payment, you are paying towards both your principal and interest. Your regular mortgage payments will stay the same for the entire length of your term, but the portions that go towards your principal balance or the interest will change over time.

As your principal payments lower your principal balance, your mortgage will become smaller and smaller over time. A smaller principal balance will result in less interest being charged. However, since your monthly mortgage payment stays the same, this means that the amount being paid towards your principal will become larger and larger over time. This is why your initial monthly payment will have a larger proportion going towards interest compared to the interest payment near the end of your mortgage term.

This behaviour can change depending on your mortgage type. Fixed-rate mortgages have an interest rate that does not change. Your principal will be paid off at an increasingly faster rate as your term progresses.

On the other hand, variable-rate mortgages have a mortgage interest rate that can change. While the monthly mortgage payment for a variable-rate mortgage does not change, the portion going towards interest will change. If interest rates rise, more of your mortgage payment will go towards interest. This will reduce the amount of principal that is being paid. This will cause your mortgage to be paid off slower than scheduled. If rates decrease, your mortgage will be paid off faster.

### What is a Mortgage Principal?

A principal is the original amount of a loan or investment. Interest is then charged on the principal for a loan, while an investor might earn money based on the principal that they invested. When looking at mortgages, the mortgage principal is the amount of money that you owe and will need to pay back. For example, perhaps you bought a home for $500,000 after closing costs and made a down payment of $100,000. You will only need to borrow $400,000 from a bank or mortgage lender in order to finance the purchase of the home. This means that when you get a mortgage and borrow $400,000, your mortgage principal will be $400,000.

Your mortgage principal balance is the amount that you still owe and will need to pay back. As you make mortgage payments, your principal balance will decrease. The amount of interest that you pay will depend on your principal balance. A higher principal balance means that you’ll be paying more mortgage interest compared to a lower principal balance, assuming the mortgage interest rate is the same.

### What is Mortgage Interest?

Interest is charged by lenders in exchange for allowing you to borrow money. For borrowers, mortgage interest is charged based on your mortgage principal balance. The mortgage interest charged is included in your regular mortgage payments. This means that with every mortgage payment, you will be paying both your mortgage principal and your mortgage interest.

Your regular mortgage payment amount is set by your lender so that you’ll be able to pay off your mortgage on time based on your selected amortization period. This is why your mortgage payment amount can change when you renew your mortgage or refinance your mortgage. This can change your mortgage rate, which will impact the amount of mortgage interest due. If you now have a higher mortgage rate, your mortgage payment will be higher to account for the higher interest charges. If you’re borrowing a larger amount of money, your mortgage payment may also be higher due to interest being charged on a larger principal balance.

However, mortgage interest isn’t the only cost that you’ll need to pay. Your mortgage might have other costs and fees, such as set-up fees or appraisal fees, that are necessary to get your mortgage. Since you’ll need to pay these extra costs in order to borrow money, they can increase the actual cost of your mortgage. That’s why it can be a better idea to compare lenders based on their annual percentage rate (APR). A mortgage’s APR reflects the true cost of borrowing for your mortgage.

### Mortgage Interest Compounding in Canada

Mortgage interest in Canada is compounded semi-annually. This means that while you might be making monthly mortgage payments, your mortgage interest will only be compounded twice a year. Semi-annual compounding saves you money compared to monthly compounding. That’s because interest will be charged on top of your interest less often, giving interest less room to grow.

To see how this works, let’s first look at credit cards. Not all credit cards in Canada charge compound interest, but for those that do, they usually are compounded monthly. The unpaid interest is added to the credit card balance, which will then be charged interest if it continues to be unpaid. For example, you purchased an item for $1,000 and charged it to your credit card which has an interest rate of 20%. You decide not to pay it off and make no payments. To simplify, assume that there is no minimum required payment.

To calculate the interest charged, you’ll need to find the daily interest rate. 20% divided by 365 days gives a daily interest rate of 0.0548%. For a 30-day period, you’ll be charged $16.44 interest. Interest is calculated daily but only added once a month. Since you’re not making any payments and are still carrying a balance, your credit card balance for the following month will be $1016.44. As the interest is added to your balance, this means that interest is being charged on top of your existing interest charges. For another 30-day period, you’ll be charged $16.71 interest, which now makes your credit card balance $1,033.15.

The same applies to mortgages, but instead of monthly compounding, the compounding period for mortgages in Canada is semi-annually. Instead of adding unpaid interest to your balance every month like a credit card, a mortgage lender is limited to adding unpaid interest to your mortgage balance twice a year. In other words, this affects your actual interest rate based on the interest being charged.

### Mortgage Effective Annual Rate Formula (EAR)

To account for semi-annual compounding, you can calculate your mortgage’s effective annual rate (EAR). The number of compounding periods in a year is two. To use the effective annual rate formula below, convert your interest rate from a percent into decimals.

^{2}- 1

For example, if your mortgage lender quotes a mortgage rate of 3%, then your effective annual rate will be:

^{2}- 1 = 0.030225 = 3.0225%

If your mortgage lender quotes a mortgage rate of 5%, then your effective annual rate will be:

^{2}- 1 = 0.050625 = 5.0625%

This calculation assumes that interest will be compounded semi-annually, which is the law for mortgages in Canada. For a more general formula for EAR:

^{n}- 1

Where “n” is the number of compounding periods in a year. For example, if interest is being compounded monthly, then “n” will be 12. If interest is only compounded once a year, then “n” will be 1.

### How to calculate mortgage interest

To calculate interest paid on a mortgage, you will first need to know your mortgage balance, the amount of your monthly mortgage payment, and your mortgage interest rate. For example, you might want to calculate mortgage interest for a mortgage of $500,000 with monthly payments of $2,500 at a 3% mortgage rate .

To find how much interest is paid on your initial monthly mortgage payment, you just need to apply the interest rate against your mortgage balance as a monthly rate. Applying the 3% mortgage rate to the mortgage balance, you will get an annual interest amount of $15,000. You then divide this by 12 to get your monthly interest amount, which would be $1,250. As your monthly payment is $2,500, the remaining amount of $1,250 will go towards your principal.

To calculate mortgage interest paid for the second month, you first need to recalculate your mortgage balance. Since you paid $1,250 towards your principal in the first month, your new mortgage balance is $498,750. The interest paid will be 3% of $498,750 divided by 12 to get a monthly rate. You will get $1,246.87, which is the interest paid in the second month. Your principal payment will be the remaining out of the $2,500 payment, which would be $1,253.13.

Notice how your interest payment is slightly lower while your principal payment is now slightly higher. You paid $3.13 less interest in the second month compared to the first month, and you paid $3.13 more towards your principal in the second month compared to the first month.

You will now repeat the same steps until your mortgage is fully paid off. A way to easily organize and calculate this is to create an amortization schedule. You can use the mortgage interest calculator above to calculate your total interest and principal payments, and also to create a downloadable amortization schedule.

### Bi-Weekly vs Monthly Mortgage Payments

Bi-weekly mortgage payments means that you make mortgage payments every two weeks. Since the time between payments is reduced, the effect of lower mortgage balances and resulting lower interest can build up faster. Bi-weekly payments also mean that you will make more mortgage payments in a year.

There are 12 months in a year, which will result in only 12 mortgage payments if you were to make monthly payments. There are 52 weeks in a year, which will result in 26 bi-weekly mortgage payments. This creates an additional 2 bi-weekly mortgage payments, or the equivalent of an extra monthly mortgage payment, every year.

Making more mortgage payments with bi-weekly mortgage payments will allow you to make more payments, resulting in your mortgage being paid off sooner. Choosing bi-weekly payments can let you pay off your mortgage a few years earlier, while also saving you in mortgage interest.

### How Does Amortization Affect Mortgage Interest?

Your amortization period is the length of time that it will take for you to pay off your mortgage fully if you only make your required regularly scheduled mortgage payments. The longer you owe money, the more time there is for interest to be charged. That’s why a longer amortization period will result in a higher total interest paid compared to a shorter amortization period. On the other hand, a shorter amortization requires larger mortgage payments in order to pay off the mortgage faster. While this will save you money, you will need to be able to afford these larger payments.

In Canada, the most common amortization period is 25 years. Coincidently, it’s also the maximum amortization limit allowed for insured mortgages, such as mortgages that have CMHC insurance. However, you can always choose to have a shorter or longer amortization period. How will your amortization affect your mortgage interest?

Let’s take a look at a mortgage with a principal balance of $500,000 and a fixed mortgage rate of 2.50%. We will compare 15-year, 20-year, 25-year, and 30-year amortizations to see how much interest you will have to pay over the lifetime of your mortgage loan.

If you chose a 20-year amortization instead of 25-years, you will need to pay an extra $406 every month but you will save $37,042 in interest over 20 years. If you paid an extra $1,091 every month for a 15-year amortization, you’ll save a total of $72,815 in interest. If you want to lower your mortgage payments and choose to get a 30-year amortization instead, you’ll save $268 per month through lower payments but end up paying $38,293 more in interest.

The interest vs. principal ratio also gives us a look at how each option compares. With a 30-year amortization, you’ll be paying 42.2% on your mortgage balance in interest. Choosing a 15-year amortization can slash this ratio in more than half, to just 20%. Of course, the above calculations assume that you will not be making any extra payments and that your mortgage rate is fixed at 2.50%. The numbers will change depending on your actual interest rates, but the positions of each option will not.

### Breakdown of Mortgage Payments

It’s important to understand your mortgage payment structure so that you can find ways to save money. Let's take a look at mortgage payments and their payment breakdowns.

Your mortgage principal balance and your mortgage interest will change during your mortgage term, but something that doesn't change is your monthly payment amount. Your selected amortization period determines your monthly payment amount which will be fixed for the duration of your term. When you first get a mortgage, most of your monthly payment will go towards interest. You haven’t had time to pay down your mortgage balance yet, and so when interest is charged, you’ll need to pay interest on a higher mortgage balance.

As time passes by and your balance decreases, there is less balance remaining for interest to be charged. This reduces the proportion of interest charged compared to your monthly payment. The amount remaining can then go towards paying down your mortgage balance further. This is similar to compound interest but in reverse.

- Mortgage Principal Balance: $500,000
- Mortgage Rate: 2.50% fixed for the entire amortization

15 Year | 20 Year | 25 Year | 30 Year | |
---|---|---|---|---|

Monthly Mortgage Payment | $3,334 | $2,649 | $2,243 | $1,975 |

Monthly Payment Difference(Compared to 25 Year) | +$1,091 | +$406 | - | -$268 |

Total Interest Cost(Until Mortgage Is Fully Paid Off) | $100,110 | $135,883 | $172,925 | $211,218 |

Total Interest Cost Difference(Compared to 25 Year) | -$72,815 | -$37,042 | - | +$38,293 |

Interest vs Principal Ratio | 20.0% | 27.2% | 34.6% | 42.2% |

This is one reason why making mortgage prepayments is so important if you want to save money. Banks and mortgage lenders usually allow you to make mortgage prepayments up to a certain limit every year for closed mortgages. For example, RBC lets you make prepayments up to 10% of your principal every year, while the limit with TD is 15%. You can make prepayments without prepayment penalties if you stay under their annual limits.

Mortgage prepayments are payments that go directly towards paying down your principal balance. Making prepayments can also allow you to pay off your mortgage ahead of schedule. This saves you money and makes you one step closer to becoming mortgage-free.

## How To Calculate Your Mortgage Payment: Fixed, Variable, and More

Understanding your mortgage helps you make better financial decisions. Instead of just accepting offers blindly, it’s wise to look at the numbers behind any loan—especially a significant loan like a home loan.

### Key Takeaways

- You can calculate your monthly mortgage payment by using a mortgage calculator or doing it by hand.
- You'll need to gather information about the mortgage's principal and interest rate, the length of the loan, and more.
- Before you apply for loans, review your income and determine how much you’re comfortable spending on a mortgage payment.

### Getting Started With Calculating Your Mortgage

People tend to focus on the monthly payment, but there are other important features that you can use to analyze your mortgage, such as:

- Comparing the monthly payment for several different home loans
- Figuring how much you pay in interest monthly, and over the life of the loan
- Tallying how much you actually pay off over the life of the loan, versus the principal borrowed, to see how much you actually paid extra

Use the mortgage calculator below to get a sense of what your monthly mortgage payment could end up being,

### The Inputs

Start by gathering the information needed to calculate your payments and understand other aspects of the loan. You need the details below. The letter in parentheses tells you where we’ll use these items in calculations (if you choose to calculate this yourself, but you can also use online calculators):

- The
**loan amount**(P) or principal, which is the home-purchase price plus any other charges, minus the down payment - The annual
**interest rate**(r) on the loan, but beware that this is not necessarily the APR, because the mortgage is paid monthly, not annually, and that creates a slight difference between the APR and the interest rate - The
**number of years**(t) you have to repay, also known as the "term" - The number of
**payments per year**(n), which would be 12 for monthly payments - The
**type of loan**: For example, fixed-rate, interest-only, adjustable - The
**market value**of the home - Your
**monthly income**

### Calculations for Different Loans

The calculation you use depends on the type of loan you have. Most home loans are standard fixed-rate loans. For example, standard 30-year or 15-year mortgages keep the same interest rate and monthly payment for their duration.

For these fixed loans, use the formula below to calculate the payment. Note that the carat (^) indicates that you’re raising a number to the power indicated after the carat.

**Payment = P x (r / n) x (1 + r / n)^n(t)] / (1 + r / n)^n(t) - 1**

### Example of Payment Calculation

Suppose you borrow $100,000 at 6% for 30 years, to be repaid monthly. What is the monthly payment? The monthly payment is $599.55.

Plug those numbers into the payment formula:

- {100,000 x (.06 / 12) x [1 + (.06 / 12)^12(30)]} / {[1 + (.06 / 12)^12(30)] - 1}
- (100,000 x .005 x 6.022575) / 5.022575
- 3011.288 / 5.022575 = 599.55

You can check your math with the Loan Amortization Calculator spreadsheet.

### How Much Interest Do You Pay?

Your mortgage payment is important, but you also need to know how much of it gets applied to interest each month. A portion of each monthly payment goes toward your interest cost, and the remainder pays down your loan balance. Note that you might also have taxes and insurance included in your monthly payment, but those are separate from your loan calculations.

An amortization table can show you—month-by-month—exactly what happens with each payment. You can create amortization tables by hand, or use a free online calculator and spreadsheet to do the job for you. Take a look at how much total interest you pay over the life of your loan. With that information, you can decide whether you want to save money by:

- Borrowing less (by choosing a less expensive home or making a larger down payment)
- Paying extra each month
- Finding a lower interest rate
- Choosing a shorter-term loan (15 years instead of 30 years, for example) to speed up your debt repayment

Shorter-term loans like 15-year mortgages often have lower rates than 30-year loans. Although you would have a bigger monthly payment with a 15-year mortgage, you would spend less on interest.

### Interest-Only Loan Payment Calculation Formula

Interest-only loans are much easier to calculate. Unfortunately, you don’t pay down the loan with each required payment, but you can typically pay extra each month if you want to reduce your debt.

*Example:* Suppose you borrow $100,000 at 6% using an interest-only loan with monthly payments. What is the payment? The payment is $500.

Loan Payment = Amount x (Interest Rate / 12)

**Loan payment = $100,000 x (.06 / 12) = $500**

Check your math with the Interest Only Calculator on Google Sheets.

In the example above, the interest-only payment is $500, and it will remain the same until:

- You make additional payments, above and beyond the required minimum payment. Doing so will reduce your loan balance, but your required payment might not change right away.
- After a certain number of years, you’re required to start making amortizing payments to pay down the debt.
- Your loan may require a balloon payment to pay off the loan entirely.

### Adjustable-Rate Mortgage Payment Calculation

Adjustable-rate mortgages (ARMs) feature interest rates that can change, resulting in a new monthly payment. To calculate that payment:

- Determine how many months or payments are left.
- Create a new amortization schedule for the length of time remaining (see how to do that).
- Use the outstanding loan balance as the new loan amount.
- Enter the new (or future) interest rate.

*Example:* You have a hybrid-ARM loan balance of $100,000, and there are ten years left on the loan. Your interest rate is about to adjust to 5%. What will the monthly payment be? The payment will be $1,060.66.

### Know How Much You Own (Equity)

It’s crucial to understand how much of your home you actually own. Of course, you own the home—but until it’s paid off, your lender has a lien on the property, so it’s not yours free-and-clear. The value that you own, known as your "home equity," is the home’s market value minus any outstanding loan balance.

You might want to calculate your equity for several reasons.

**Your loan-to-value (LTV) ratio**is critical, because lenders look for a minimum ratio before approving loans. If you want to refinance or figure out how big your down payment needs to be on your next home, you need to know the LTV ratio.**Your net worth**is based on how much of your home you actually own. Having a one million-dollar home doesn’t do you much good if you owe $999,000 on the property.**You can borrow against your home**using second mortgages and home equity lines of credit (HELOCs). Lenders often prefer an LTV below 80% to approve a loan, but some lenders go higher.

### Can You Afford the Loan?

Lenders tend to offer you the largest loan that they’ll approve you for by using their standards for an acceptable debt-to-income ratio. However, you don’t need to take the full amount—and it’s often a good idea to borrow less than the maximum available.

Before you apply for loans or visit houses, review your income and your typical monthly expenses to determine how much you’re comfortable spending on a mortgage payment. Once you know that number, you can start talking to lenders and looking at debt-to-income ratios. If you do it the other way around (ignoring your expenses and basing your housing payment solely on your income), you might start shopping for more expensive homes than you can afford, which affects your lifestyle and leaves you vulnerable to surprises.

It’s safest to buy less and enjoy some wiggle room each month. Struggling to keep up with payments is stressful and risky, and it prevents you from saving for other goals.

### Frequently Asked Questions (FAQs)

### What is a fixed-rate mortgage?

A fixed-rate mortgage is a home loan that has the same interest rate for the life of the loan. This means your monthly principal and interest payment will stay the same. The proportion of how much of your payment goes toward interest and principal will change each month due to amortization. Each month, a little more of your payment goes toward principal and a little less goes toward interest.

### What is an interest-only mortgage?

An interest-only mortgage is a home loan that allows you to only pay the interest for the first several years you have the mortgage. After that period, you'll need to pay principal and interest, which means your payments will be significantly higher. You can make principal payments during the interest-only period, but you're not required to.

Figuring out what you’ll pay monthly for your mortgage is easy. Just fill in the details, using the mortgage calculator above, to get an estimate of your monthly mortgage payment.

### Estimated Home Value:

If you are buying a house, enter the price of the property you are considering. If you’re refinancing your home loan, enter your home’s current value.

### Down Payment:

If you are buying computing mortgage payments formula house, enter the amount of your down payment. If you are refinancing, enter the amount of equity you have in the property.

Equity = Estimated Home Value - Present Loan Balance

### Loan Amount:

This will automatically calculate for you based on your estimated home value and down payment amounts

Loan Amount = Estimated Home Value - Down Payment

### Interest Rate:

Enter the interest rate you estimate you will pay on your mortgage loan. Your interest rate can vary by the type of mortgage you choose, the term of your loan and the rate for which you qualify. If you are wondering about today’s interest rates, or would like to start the preapproval or application process, contact a mortgage loan officer.

### Term:

This is the number of years it will take to pay off your mortgage. Typically, a mortgage loan is either a 15- or 30-year term, but there are other options. If you are refinancing your home to a shorter or longer term, you can adjust the term length and see the difference it will make to your monthly mortgage payment. *Paying additional dollars each month on your mortgage principal may reduce the length of your term.*

### Annual Property Tax:

Property taxes vary not only by state, but by county, too. You can estimate your annual property taxes by taking the assessed value of your home and multiplying it by your local property tax rate.

For example, if you want to know the amount of your annual property tax for a $100,000 house in Omaha, Nebraska, you would multiply $100,000 by the Omaha property tax rate of 2.38% for a total of $2,388.00. To estimate the property tax in your city/town and state, visit this website.

### Annual Property Insurance:

The premium for your annual property insurance can vary depending on your location and the insurance company that underwrites your policy.

## Mortgage cost and repayment calculator

### What will my mortgage cost?

See examples of costs for different mortgage types, payment terms and interest rates.

##### Loading results. Please wait.

#### Mortgage terms

**Initial payments and rate**

The monthly payment and rate you'll pay until your introductory period ends.

**Follow-on payments and rate**

The payments and rate you'll pay after your introductory period ends if you don’t change anything.

**APRC**

Use the annual percentage rate of charge to compare the cost of our mortgages, including interest and fees, with those from other lenders.

**Mortgage fee**

You can pay this fee when you submit a mortgage application, or add it to the amount you borrow.

**Total of monthly payments**

The information below shows roughly how your monthly payments will affect your mortgage balance over time. But they don't include any other fees or payments you may need to make.

**Loan to value**

The percentage of the property value that you're going to borrow. We divide your mortgage amount by the property value to work out the LTV.

**Early repayment charge**

The amount you'll pay if you want to pay off the mortgage early or make an overpayment that's more than we've agreed to.

**Fixed-rate**

Your rate stays the same for a set period, so your monthly payments remain the same even if our base rate changes.

**Tracker**

Your rate is a certain amount above our base rate. If base rate goes up or down, your payments will too (it's sometimes called a home remedies for dry cough at night rate').

**Offset**

Money you have in another account with us is used to lower the mortgage balance we charge interest on. All our offset mortgages are trackers.

**How our mortgage calculator works**

**Monthly repayments**We divide the mortgage amount and the total interest you’d pay by the number of months you want to repay the money over.

**Rounding of repayment amounts**We use the unrounded repayment to work out the amount of interest you’d pay over the mortgage term.

**Interest rate**We use the rate to calculate the total interest you’d pay over the mortgage term. The calculator assumes that the rate won’t change during the mortgage term.

**Timing of interest conversion**We assume interest will be charged at the same frequency as the mortgage repayments are made.

### Cover for the things that matter most

#### Full range of Irish Mortgage Calculators available on mortgages.ie

### How Much Can I Borrow?

This mortgage calculator will give you an estimate of your maximum borrowing capacity. The calculator allows you to add in other financial commitments to test the affordability of any potential borrowing. This calculator uses a range of factors to estimate your mortgage borrowing limit. These figures are not set in stone as all lenders use a range of factors in estimating your borrowing capacity. Our consultants will provide you details and additional information about how borrowing limits vary between lenders. Use our How Much Can I Borrow Calculator

### Mortgage Repayment Calculator

This mortgage calculator is probably the most advanced Irish mortgage calculator available. Compare rates from a range of lenders to find the best selection **computing mortgage payments formula** on your requirements. Advanced features allow you to select from different types of mortgage or from specific lenders and order your results based on different criteria such as: lowest overall cost, lowest starting payments. You can also stress test your mortgage and view the effects of increasing your payments using the payment acceleration feature. Use our Mortgage Repayment Calculator

back to top

### Mortgage Protection Insurance Calculator

This calculator allows you to input your cover requirements and personal details and then compares quotes to find the best deal on mortgage protection insurance and life insurance. You can also benefit from our special discounts on the best quotes of 16% for mortgage protection and 15% for life insurance. Try our Mortgage Protection Insurance Calculator now

back to top

### Basic Mortgage Calculator.

Input any rate and term and review repayments and interest element of repayments. Use our Basic Mortgage calculator

back to top

### Debt Consolidation/Remortgage Calculator

This calculator allows you to enter your current mortgage, loans and credit card payments. You can enter any additional funds you require then the calculator works out your new monthly payments. The repayments are shown over a range of different repayment terms. Use our Remortgage Calculator.

back to top

### Switch and Save Calculator

This mortgage calculator will help you find out how much you can save by switching your mortgage to a different lender or mortgage type. Simply enter the details of your current borrowing and remaining term and the calculator will display the monthly and total savings you will make. Use our Switch and Save Calculator

back to top

### Stamp Duty Calculator

Calculates stamp duty for new and second hand homes, for first time and remortgaging borrowers. This calculator will tell you if you are exempt from stamp duty payments and where payments are due, it will calculate the value of the payment. Use our Stamp Duty Calculator

back to top

### Should I Fix

This calculator calculates the savings or additional costs over the term of the fixed rate between your current variable rate and the lowest fixed rate in offered by our lenders. Use our Should I Fix Calculator

back to top

### Investment Affordability Calculator

This calculator analyses your current income, details of your proposed investment, and current equity position and, calculates the affordability of your proposal.

The calculator includes factors like equity release and fit-out costs and other income and expenditure to give a clear overall picture of your financial position in an investment scenario.

We recommend this calculator as a good starting point when considering an investment. Use our Investment Affordability Calculator

back to top

### Future Cash Flow Analysis

This advanced calculator produces a cashflow analysis for the investment term chosen. The inputs cover all main factors affecting the investment and the calculator factors in capital appreciation and increases in costs. Use our Future Cash Flow Analysis Calculator

back to top

### Portfolio Switching Calculator

For existing investors with a number of current mortgages this calculator allows you to compare the savings which can be made for each of your individual current investment mortgages. Details of each individual mortgage are entered for up to 6 different investments.

The output shows savings for interest only and capital repayment mortgages. Use our Portfolio Switching Calculator

back to top

### Moving House Calculator

This calculator is just the job if you're planning a move.

Based on your input this calculator gives you estimates of the stamp duty, agents and legal fees.

The calculator also gives you a range of suitable competitive products from a range of lenders. Use our Moving House Calculator

back to top

### Payment Accelerator Calculator

Calculate the effect of increasing your mortgage payments using our payment accelerator calculator.

back to top

To continue enjoying all the features of Navy Federal Online, please use a compatible browser. You can confirm your browser capability here.

*This calculator is for general education purposes only and is not an illustration of current Navy Federal products and offers.*

### To Compare Loan Types

Use our calculator to compare different types of mortgages and loan terms to decide which one works best for you. For example, a 30-year mortgage typically has a lower monthly payment, but adjusting to a 15-year term can save you money in the long run.

### To Plan for Your Down Payment

Decide how much money you should put down so your monthly payment is affordable for your budget. If you don't have a down payment saved up, most of our mortgages have options that don't require one.^{1}

### To Decide How Much Home You Can Afford

Our calculator can help you determine an affordable home price for you, taking into account your other debts (such as auto or student loans), monthly expenses (like utilities) and the size of your down payment (if any).

### To Consider Other Home-Buying Finances

From mortgage closing costs to a reserve fund for home repairs, there are other expenses associated with buying a home.

^{1}

Product features subject to approval. 100% financing loans may include an additional funding fee, which may be financed up to the maximum loan amount. Available for purchase loans only.

↵## Mortgage payment calculator

Skip to main content

### Calculate how much your mortgage payment could be each month.

**This mortgage payment calculator gives you an estimate.**

This mortgage payment calculator provides customized information based on the information you provide. But, it assumes a few things about you. For example, that you’re buying a single-family home as your primary residence. This calculator also makes assumptions about closing costs, lender’s fees and other costs, which can be significant.

### Understand your monthly mortgage payment.

Your monthly mortgage payment depends on a number of factors, like purchase price, down payment, interest rate, loan term, property taxes and insurance.

### Purchase price

Purchase price refers to the total amount you agree to pay to the property’s seller. This amount is typically different from your loan amount, since most lenders won’t loan you the full amount of a property’s purchase price.

#### Calculator assumption: single-family home

This mortgage payment calculator assumes that you’re buying a single-family home as your primary residence.

#### What can you afford?

Our mortgage affordability calculator can give you an idea of your target purchase price. You can make the calculation based on your income or how much you’d like to pay per month.

Calculate your mortgage affordability

#### Get prequalified.

Are you ready to start taking steps toward a new home? If your answer is yes, get an estimate of what you may be able to borrow in just a few minutes.

Apply for prequalification

### Down payment

A down payment is the cash you pay up front when you buy a home. The larger your down payment, the less you’ll need to borrow and pay in interest.

#### Calculator assumption: 20% down payment

This mortgage payment calculator assumes that you have a 20% down payment, unless you specify otherwise. If you have less than a 20% down payment, you may have to pay private mortgage insurance (PMI), which would increase your monthly mortgage payment.

#### How much will you put down?

Want to see how much your down payment amount can affect your mortgage over time? Our down payment calculator can give an idea of your ideal down payment.

Calculate your down payment

#### Start saving for a down payment.

When you’re ready to buy a home, a higher down payment can save you money in the long run. If you plan to buy in the near future, setting money aside now can only help.

Learn to save for a down payment

#### Reach out to a mortgage loan officer.

If you’re ready to have a conversation about your mortgage options, a professional mortgage loan officer is just a phone call or an email away.

Find a mortgage loan officer

### Interest rate

The interest rate is the amount of money your lender charges you for using their money. It’s shown as a percentage of your principal loan amount.

#### Understand your credit score.

Credit score is a pretty big deal when it comes to buying a home. The higher your credit score, the better computing mortgage payments formula chances are for approval and for better interest rates.

Learn how to build credit

#### Browse all mortgage products.

U.S. Bank offers loans that meet almost every mortgage need, and our mortgage loan officers are ready to go to work for you.

Compare mortgage products

### More tools and calculators

### Today’s mortgage rates

Interest rates vary depending on the type of mortgage you choose. See the differences and how they can impact your monthly payment.

Compare mortgage rates

### Fixed-rate mortgage calculator

Fixed-rate loans offer a consistent rate and monthly payment over the life of the loan. They typically have 10- 15- 20- or 30-year loan terms, but other terms may be available.

Calculate a fixed-rate monthly payment

### Adjustable-rate mortgage calculator

Adjustable-rate mortgage (ARM) loans often feature lower rates and monthly payments during their initial rate period, but rates can change once the initial rate period expires.

Calculate an ARM monthly payment

## Article provided by Fintactix

Repayment of a mortgage loan requires that *computing mortgage payments formula* borrower make a monthly payment back to the lender. Each monthly payment typically covers some portion of the loan principal, plus monthly interest on *computing mortgage payments formula* outstanding balance. Loan payments are amortized so that your monthly payment remains the same during the repayment period, but the percentage of the payment that goes towards principal will increase as the outstanding mortgage balance decreases. Mortgage payments can also include amounts for property taxes, homeowner's insurance and monthly homeowner's association dues into an escrow account, managed by your lender. When those items are due, your lender will make the payment to the tax authority, insurance company or homeowner's association.

Use this calculator to calculate a mortgage payment.

## Mortgage Interest Calculator Canada

When you make a mortgage payment, you are paying towards both your principal and interest. Your regular mortgage payments will stay the same for the entire length of your term, but the portions that go towards your principal balance or the interest will change over time.

As your principal payments lower your principal balance, your mortgage will become smaller and smaller over time. A *computing mortgage payments formula* principal balance will result in less interest being charged. However, since your monthly mortgage payment stays the same, this means that the amount being paid towards your principal will become larger and larger over time. This is why your initial monthly payment will have a larger proportion going towards interest compared to the interest payment near the end of your mortgage term.

This behaviour can change depending on your mortgage type. Fixed-rate mortgages have an interest rate that does not change. Your principal will be paid off at an increasingly faster rate as your term progresses.

On the other hand, variable-rate mortgages have a mortgage interest rate that can change. While the monthly mortgage payment for a variable-rate mortgage does not change, the portion going towards interest will change. If interest rates rise, more of your mortgage payment will go towards interest. This will reduce the amount of principal that is being paid. This will cause your mortgage to be paid off slower than scheduled. If rates decrease, your mortgage will be paid off faster.

### What is a Mortgage Principal?

A principal is the original amount of a loan or investment. Interest is then charged on the principal for a loan, while an investor might earn money based on the principal that they invested. When looking at mortgages, the mortgage principal is the amount of money that you owe and will need to pay back. For example, perhaps you bought a home for $500,000 after closing costs and made a down payment of $100,000. You will only need to borrow $400,000 from a bank or mortgage lender in order to finance the purchase of the home. This means that when you get a mortgage and borrow $400,000, your mortgage principal will be $400,000.

Your mortgage principal balance is the amount that you still owe and will need to pay back. As you make mortgage payments, your principal balance will decrease. The amount of interest that you pay will depend on your principal balance. A higher principal balance means that you’ll be paying more mortgage interest compared to a lower principal balance, assuming the mortgage interest rate is the same.

### What is Mortgage Interest?

Interest is charged by lenders in exchange for allowing you to borrow money. For borrowers, mortgage interest is charged based on your mortgage principal balance. The mortgage interest charged is included in your regular mortgage payments. This means that with every mortgage payment, you will be paying both your mortgage principal and your mortgage interest.

Your regular mortgage payment amount is set by your lender so that you’ll be able to pay off your mortgage on time based on your selected amortization period. This is why your mortgage payment amount can change when you renew your mortgage or refinance **computing mortgage payments formula** mortgage. This can change your mortgage rate, which will impact the amount of mortgage interest due. If you now have a higher mortgage rate, your mortgage payment will be higher to account for the higher interest charges. If you’re borrowing a larger amount of money, your mortgage payment may also be higher due to interest being charged on a larger principal balance.

However, mortgage interest isn’t the only cost that you’ll need to pay. Your mortgage might have other costs and fees, such as set-up fees or appraisal fees, that are necessary to get your mortgage. Since you’ll need to pay these extra costs in order to borrow money, they can increase the actual cost of your mortgage. That’s why it can be a better idea to compare lenders based on their annual percentage rate (APR). A mortgage’s APR reflects the true cost of borrowing for your mortgage.

### Mortgage Interest Compounding in Canada

Mortgage interest in Canada is compounded semi-annually. This means that while you might be making monthly mortgage payments, your mortgage interest will only be compounded twice a year. Semi-annual compounding saves you money compared to monthly compounding. That’s because interest will be charged on top of your interest less often, giving interest less room to grow.

To see how this works, let’s first look at credit cards. Not all credit cards in Canada charge compound interest, but for those that do, they usually are compounded monthly. The unpaid interest is added to the credit card balance, which will then be charged interest if it continues to be unpaid. For example, you purchased an item for $1,000 and charged it to your credit card which has an interest rate of 20%. You decide not to pay it off and make no payments. To simplify, assume that there is no minimum required payment.

To calculate the interest charged, you’ll need to find the daily interest rate. 20% divided by 365 days gives a daily interest rate of 0.0548%. For a 30-day period, you’ll be charged $16.44 interest. Interest is calculated daily but only added once a month. Since you’re not making any payments and are still carrying a balance, your credit card balance for the following month will be $1016.44. As the interest is added to your balance, this means that interest is being charged on top of your existing interest charges. For another 30-day period, you’ll be charged $16.71 interest, which now makes your credit card balance $1,033.15.

The same applies to mortgages, but instead of monthly compounding, the compounding period for mortgages in Canada is semi-annually. Instead of adding unpaid interest to your balance every month like a credit card, a mortgage lender is limited to adding unpaid interest to your mortgage balance twice a year. In other words, computing mortgage payments formula affects your actual interest rate based on the interest being charged.

### Mortgage Effective Annual Rate Formula (EAR)

To account for semi-annual compounding, you can calculate your mortgage’s effective annual rate (EAR). The number of compounding periods in a year is two. To use the effective annual rate formula below, convert your interest rate from a percent into decimals.

^{2}- 1

For example, if your mortgage lender quotes a mortgage rate of 3%, then your effective annual rate will be:

^{2}- 1 = 0.030225 = 3.0225%

If your mortgage lender quotes a mortgage rate of 5%, then your effective annual rate will be:

^{2}- 1 = 0.050625 = 5.0625%

This calculation assumes that interest will be compounded semi-annually, which is the law for mortgages in Canada. For a more general formula for EAR:

^{n}- 1

Where “n” is the number of compounding periods in a year. For example, if interest is being compounded monthly, then “n” will be 12. If interest is only compounded once a year, then “n” will be 1.

### How to calculate mortgage interest

To calculate interest paid on a mortgage, you will first need to know your mortgage balance, the amount of your monthly mortgage payment, and your mortgage interest rate. For example, you might want to calculate mortgage interest for a mortgage of $500,000 with monthly payments of $2,500 at a 3% mortgage rate .

To find how much interest is paid on your initial monthly mortgage payment, you just need to apply the interest rate against your mortgage balance as a monthly rate. Applying the 3% mortgage rate to the mortgage balance, you will get an annual interest amount of $15,000. You then divide this by 12 to get your monthly interest amount, which would be $1,250. As your monthly payment is $2,500, the remaining amount of $1,250 will go towards your principal.

To calculate mortgage interest paid for the second month, you first need to recalculate your mortgage balance. Since you paid $1,250 towards your principal in the first month, your new mortgage balance is $498,750. The interest paid will be 3% of $498,750 divided by 12 to get a monthly rate. You will get $1,246.87, which is the interest paid *computing mortgage payments formula* the second month. Your principal payment will be the remaining out of the $2,500 payment, which would be $1,253.13.

Notice how your interest payment is slightly lower while your principal payment is now slightly higher. You paid $3.13 less interest in the second month compared to the first month, and you paid $3.13 more towards your principal in the second month compared to the first month.

You will now repeat the same steps until your mortgage is fully paid off. A way to easily organize and calculate this is to create an amortization schedule. You can use the mortgage interest calculator above to calculate your total interest and principal payments, and also to create a downloadable amortization schedule.

### Bi-Weekly vs Monthly Mortgage Payments

Bi-weekly mortgage payments means that you make mortgage payments every two weeks. Since the time between payments is reduced, the effect of lower mortgage balances and resulting lower interest can build up faster. Bi-weekly payments also mean that you will make more mortgage payments in a year.

There are 12 months in a year, which will result in only 12 mortgage payments if you were to make monthly payments. There are 52 weeks in a year, which *computing mortgage payments formula* result in 26 bi-weekly mortgage payments. This creates an additional 2 bi-weekly mortgage payments, or the equivalent of an extra monthly mortgage payment, every year.

Making more mortgage payments with bi-weekly mortgage payments will allow you to make more payments, resulting in your mortgage being paid off sooner. Choosing bi-weekly payments can let you pay off your mortgage a few years earlier, while also saving you in mortgage interest.

### How Does Amortization Affect Mortgage Interest?

Your amortization period is the length of time that it will take for you to pay off your mortgage fully if you only make your required regularly scheduled mortgage payments. The longer you owe money, the more time there is for interest to be charged. That’s why a longer amortization period will result in a higher total interest paid compared to a shorter amortization period. On the other hand, a shorter amortization requires larger mortgage payments in order to pay off the mortgage faster. While this will save you money, you will need to be able to afford these larger payments.

In Canada, the most common amortization period is 25 years. Coincidently, it’s also the maximum amortization limit allowed for insured mortgages, such as mortgages that have CMHC insurance. However, you can always choose to have a shorter or longer amortization period. How will your amortization affect your mortgage interest?

Let’s take a look at a mortgage with a principal balance of $500,000 and a fixed mortgage rate of 2.50%. We will compare 15-year, 20-year, 25-year, and 30-year amortizations to see how much interest you will have to pay computing mortgage payments formula the lifetime of your mortgage loan.

If you chose a 20-year amortization instead of 25-years, you will need to pay an extra $406 every month but you will save $37,042 in interest over 20 years. If you paid an extra $1,091 every month for a 15-year amortization, you’ll save a total of $72,815 in interest. If you want to lower your mortgage payments and choose to get a 30-year amortization instead, you’ll save $268 per month through lower payments but end up paying $38,293 more in interest.

The interest vs. principal ratio also gives us a look at how each option compares. With a 30-year amortization, you’ll be paying 42.2% on your mortgage balance in interest. Choosing a 15-year amortization can slash this ratio in more than half, to just 20%. Of course, the above calculations assume that you will not be making any extra payments and that your mortgage rate is fixed at 2.50%. The numbers will change depending on your actual interest rates, but the positions of each option will not.

### Breakdown of Mortgage Payments

It’s important to understand your mortgage payment structure so that you can find ways to save money. Let's take a look at mortgage payments and their payment breakdowns.

Your mortgage principal balance and your mortgage interest will change during your mortgage term, but something that doesn't change is your monthly payment amount. Your selected amortization period determines your monthly payment amount which will be fixed for the duration of your term. When you first get a mortgage, most of your monthly payment will go towards interest. You haven’t had time to pay down your mortgage balance yet, and so when interest is charged, you’ll need to pay interest on a higher mortgage balance.

As time passes by and your balance decreases, there is less balance remaining for interest to be charged. This reduces the proportion of interest charged compared to your monthly payment. The amount remaining can then go towards paying down your mortgage balance further. This is similar to compound interest but in reverse.

- Mortgage Principal Balance: $500,000
- Mortgage Rate: 2.50% fixed for the entire amortization

15 Year | 20 Year | 25 Year | 30 Year | |
---|---|---|---|---|

Monthly Mortgage Payment | $3,334 | $2,649 | $2,243 | $1,975 |

Monthly Payment Difference(Compared to 25 Year) | +$1,091 | +$406 | - | -$268 |

Total Interest Cost(Until Mortgage Is Fully Paid Off) | $100,110 | $135,883 | $172,925 | $211,218 |

Total Interest Cost Difference(Compared to 25 Year) | -$72,815 | -$37,042 | - | +$38,293 |

Interest vs Principal Ratio | 20.0% | 27.2% | 34.6% | 42.2% |

This is one reason why making mortgage prepayments is so important if you want to save money. Banks and mortgage lenders usually allow you to make mortgage prepayments up to a certain limit every year for closed mortgages. For example, RBC lets you make prepayments up to 10% of your principal every year, while the limit with TD is 15%. You can make prepayments without prepayment penalties if you stay under their annual limits.

Mortgage prepayments are payments that go directly towards paying down your principal balance. Making prepayments can also allow you to pay off your mortgage ahead of schedule. This saves you money and makes you one step closer to becoming mortgage-free.

**computing mortgage payments formula**not responsible for any consequences of the use of the calculator.