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Mortgage Interest Calculator

Created by Tibor Pál, PhD candidate
Reviewed by Rijk de Wet
Based on research by
Cipra T. Financial and Insurance Formulas; 2006
Last updated: Jan 18, 2024


This mortgage interest calculator (or mortgage principal and interest calculator) is a helpful tool for estimating how much interest you'll pay on your mortgage over time. The calculator can estimate your monthly payment and the total interest you'll pay — all you have to do is enter some parameters, such as the loan amount, interest rate, loan period, and mortgage type.

In this article, you'll learn how to calculate mortgage interest and how to use this mortgage calculator with interest.

💡 If you'd like to get more insight into the amortization method (which is the main feature of loan repayments), you could visit our mortgage amortization calculator.

What is mortgage interest?

Mortgage interest is the cost of borrowing money to purchase a home. It is calculated with a percentage of the loan amount, the interest rate, and the loan term. It's then added to your monthly mortgage payment. Longer loan terms and higher interest rates generally result in greater interest payments.

How can I use the mortgage interest calculator?

You can apply our mortgage interest calculator by providing the following parameters.

  • Mortgage principal — The amount of your mortgage;
  • Mortgage term — The remaining or original mortgage term;
  • Mortgage rate — Annual interest rate;
  • Mortgage type — You can use this tool for both fixed and adjustable mortgages; and
  • Compounding frequency — How the lender computes interest on the principal. You can access this parameter in the calculator's advanced mode.

If you choose an adjustable-rate mortgage (an ARM), the following additional options will appear:

  • Adjustments by:

    • "Manual setup" — Apply here the interest rate adjustment to be expected in the given adjustment frequency and the interest cap/floor; and

    • "Trend" — Set here the expected interest rate at the last period to let the interest rates be computed automatically in each period.

If you've selected the "Customized ARM", two more fields will appear:

  • First adjustment after — Set the term for keeping the initial interest fixed; and
  • Periods between adjustments — Choose the frequency for potential interest rate adjustments.

By activating the calculator's advanced mode, you may also add some applicable fees, which can affect the final cost of your mortgage.

  • Mortgage points — An upfront fee as a percentage of the mortgage loan — learn more about it by our mortgage points calculator.
  • Up-front fee — The upfront fee paid on the mortgage.
  • Annual fee — The yearly mortgage cost to be paid monthly (spread over the year).

The results will appear immediately after setting up the above parameters.

First, you can study the main features of your mortgage in a summary table. Most importantly, you can check the expected total mortgage interest, but you can also check the annual percentage rate (or APR). It's a more comprehensive measure of the cost compared to the interest rate, because it incorporates not only the interest but also other fees. Besides, it also incorporates the expected fluctuations in the applicable interest rate when you take an ARM.

The summary table includes the following points:

  • Monthly payment;
  • Mortgage interest;
  • APR (Annual Percentage Rate);
  • Term; and
  • Total payments.

Also, you can follow the progression of balance in a chart and check the amortization table where you can see the applied interest rate (monthly schedule).

How to calculate mortgage interest — an example

Let's say you have a 15-year fixed-rate mortgage with a loan amount of $200,000 and an interest rate of 3%. If you feed our mortgage calculator with these parameters, you will see that your monthly principal and interest payment would be $1,381.16.

In the first month, in line with the loan amortization method, your payment will cover mostly interest:

  • $500 mortgage interest, calculated by multiplying the loan balance (the principal) by the monthly interest rate of 0.0025.
  • $881 towards principal, calculated by subtracting the interest payment from the total monthly payment of $1,381.16.

After 10 years, the allocation of your payment will be devoted more to the repayment of the principal.

  • $192 mortgage interest (the principal balance after 10 years multiplied by the periodic rate: 76,864.99 × 0.0025)
  • $1,189 of principal.

FAQ

Why is it important to know about mortgage interest?

Understanding mortgage interest is important because it affects the entire cost of your home loan. You may save money and make better financial decisions if you know how interest is calculated and how to reduce it.

Can I reduce my mortgage interest payment?

Yes, you may lower the mortgage interest by accelerating your mortgage through higher payments. You may consider refinancing if interest rates have dropped since you took your mortgage.

Which factors affect my expected mortgage interest?

Your credit score, loan amount, loan length, down payment, and mortgage type are all factors that can influence your mortgage interest. Furthermore, economic factors such as inflation and the status of the housing market can affect interest rates.

What is the monthly payment of a 15-year mortgage of $200,000 with a 3% rate?

The monthly payment of a 15-year mortgage of 200,000$ with a three percent fixed-rate mortgage is $1,381.

How can I calculate the mortgage interest in a given month?

Follow these steps to calculate the monthly mortgage interest.

  1. Check your exact principal;
  2. Determine the monthly periodic rate;
  3. Multiply the principal balance by the monthly periodic interest rate.

Disclaimer

You should consider the mortgage interest calculator as a model for financial approximation. All payment figures, balances, and interest figures are estimates based on the data you provided in the specifications that are, despite our best effort, not exhaustive.

For this reason, we created the calculator for instructional purposes only. Still, if you experience a relevant drawback or encounter any inaccuracy, we are always pleased to receive useful feedback and advice.

Tibor Pál, PhD candidate
Mortgage principal
$
Mortgage term
yrs
Interest rate
%
Mortgage type
Fixed-rate
Results
Represent...
Chart of balances
Schedule from...
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Copyright by Omni Calculator sp. z o.o.
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Monthly payment$1,649.89
Mortgage interest$145,973.44
Term20 years
APR5%
Total payments$395,973.44