How to use the Mortgage Calculator
- Enter the loan amount — the purchase price minus your deposit, not the price itself.
- Enter the annual interest rate exactly as quoted; the calculator converts it to a monthly rate.
- Set the term in years, usually 25 or 30 for a residential mortgage.
- Read the monthly payment, then compare total interest across two terms before choosing one.
How the calculation works
A mortgage is a fully amortising loan. The lender charges the monthly rate on the outstanding balance, and the payment is sized so that the balance reaches exactly zero on the final scheduled payment. Because interest is charged on what remains rather than on the original sum, the split between interest and principal shifts month by month.
That shift is why extra payments are so effective early on. In the first years the balance is near its peak, so most of each payment is interest; by the final years the same payment is almost entirely principal. Lengthening the term reduces the monthly figure but adds years of interest on a slowly falling balance, which is why a 30-year term can cost far more than a 25-year one despite a similar rate.
The result covers principal and interest only. Property tax, buildings insurance, mortgage insurance and any service charge are billed separately or escrowed, so your actual outgoing will be higher than the figure shown here.
M = P × [ r(1 + r)^n ] / [ (1 + r)^n − 1 ] where r = annual rate / 12 and n = years × 12Source: Standard amortisation formula for a fixed-rate annuity loan, as used in lender disclosure calculations.
Worked example
A buyer purchases at 385,000 with a 57,750 deposit, borrowing 327,250 at 6.35% over 30 years.
- Monthly rate r = 0.0635 / 12 = 0.00529167.
- Number of payments n = 30 × 12 = 360.
- (1 + r)^n = 1.00529167^360 ≈ 6.6799.
- M = 327,250 × (0.00529167 × 6.6799) / (6.6799 − 1) ≈ 327,250 × 0.035348 / 5.6799.
Monthly payment ≈ 2,036. Total paid over 360 months ≈ 733,000, of which about 406,000 is interest.
Frequently asked questions
Why is my lender's quoted payment higher than this?+
Lenders bundle escrowed property tax, homeowners insurance and, where the deposit is under 20%, mortgage insurance into the monthly collection. This calculator shows principal and interest only, which is the part driven by the rate and term.
How much does a shorter term really save?+
Run the same loan at 30 and at 15 years. The monthly payment rises substantially, but total interest often falls by more than half, because the balance is retired far faster and interest accrues on it for fewer years.
Does making one extra payment a year make a difference?+
Yes, and more than most people expect. An extra payment applied entirely to principal removes that amount from every future interest calculation, which on a 30-year loan typically cuts four to six years off the term.
Should I use the interest rate or the APR here?+
Use the nominal interest rate to reproduce the payment your lender will collect. APR folds fees into an annualised cost figure and is designed for comparing offers, not for calculating a payment.
What happens if rates change on a variable mortgage?+
The calculation assumes a fixed rate for the whole term. On a variable or tracker product, re-run it at a rate two or three points higher to see whether the payment would still be affordable after a rise.
Last reviewed August 31, 2026. We review this page whenever the underlying formula, tax year, published rate or standard changes.