Mortgage calculator

A fixed-rate loan uses one formula: payment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1), where P is the amount borrowed, r is the yearly rate divided by 12, and n is the number of monthly payments. For $300,000 at 6.5% over 30 years, r is 0.065 ÷ 12 and n is 360, which gives $1,896.20 a month.

Over the full 30 years those payments add up to about $682,633, so the loan costs about $382,633 in interest on top of the $300,000.

Each month's interest is charged on the balance still owed. In the first month of that loan, interest is $300,000 × 0.065 ÷ 12 = $1,625.00, so only $271.20 of the $1,896.20 pays down the loan. The split shifts slowly: on this loan, more of each payment goes to principal than to interest only from the 233rd payment, in year 20. The year-by-year schedule above shows it.

Money paid on top of the payment goes straight to principal, so every later month charges interest on a smaller balance. Adding $200 a month to that loan pays it off in 23 years 1 month and saves about $103,449 in interest.

A shorter term does the same thing more strongly. At the same 6.5%, a 15-year loan costs $2,613.32 a month but about $170,398 in total interest, less than half the 30-year figure. In practice 15-year loans are usually offered at lower rates than 30-year ones, so check real quotes.

A loan estimate shows an APR as well as the interest rate. The APR includes certain fees, so it's usually higher, and it's the better number for comparing lenders. The monthly bill can also include property tax and insurance collected into an escrow account, and mortgage insurance on many loans with a down payment under 20%. Add tax and insurance above to see that fuller monthly figure. This calculator is for estimates, not financial advice.