The formula, and what it produces
This is an estimate for planning, not a loan quote. A lender's figure will differ because it includes fees this tool does not model. Use it to compare scenarios against each other, not to predict a closing statement.
Principal and interest come from the standard amortization formula, with the annual rate divided by twelve to give a monthly rate and the term multiplied by twelve to give a payment count. The tool then runs the loan month by month: interest is charged on the outstanding balance, whatever the payment covers beyond that reduces the principal, and the process repeats until the balance reaches zero.
That monthly simulation is what makes the rest of the page possible. It is where the total interest figure comes from, where the amortization table comes from, and how the extra-payment comparison is produced — the tool amortises the loan twice, once without your extra payment and once with it, and reports the difference. If the payment would never cover the monthly interest, the schedule is suppressed rather than showing an impossible loan.
Worked through with the default values — a $400,000 home, 20% down, 6.5% over 30 years — the $320,000 loan gives a principal-and-interest payment of $2,022.62. The first payment is $1,733.33 interest and just $289.28 principal. Principal does not exceed interest in a single payment until month 233, more than nineteen years in, and the total interest over the full term reaches $408,142 — bringing the total paid to $728,142 on a $320,000 loan.
Every assumption this calculator makes
| Input | How it is used | The assumption behind it |
|---|
| Interest rate | Divided by 12 for the monthly rate | A fixed rate for the entire term, compounded monthly. This is the US convention; Canadian fixed mortgages compound semi-annually by law, so figures there will be slightly high. |
| Property tax | Percentage of the purchase price, divided by 12 | Constant for the whole term. Real bills follow a periodically reassessed value and a rate that changes. |
| Home insurance | Annual amount ÷ 12 | Never increases. Premiums in practice rise, sometimes sharply. |
| HOA | Added as a flat monthly amount | No increases, no special assessments. |
| PMI | Percentage of the original loan ÷ 12, applied only when the down payment is under 20% | A constant premium based on the starting loan amount, not the declining balance. |
| Extra payment | Added to every month's payment, applied to principal | Paid every month without fail, from the first month, with no prepayment penalty. |
What is missing matters as much as what is there. There are no closing costs, no discount points, no origination or appraisal fees — which is why this number is not an APR and will not match the APR a lender quotes you. Adjustable rates, interest-only periods and balloon payments are not modelled at all. Neither are bi-weekly payment schedules, escrow shortages, mortgage insurance on government-backed loans (which follows different rules from conventional PMI), or maintenance, which is the cost most first-time buyers underestimate.
Reading the results properly
Compare total interest, not monthly payments. A longer term always produces a smaller monthly payment, which is exactly why it is the easiest number to be misled by. The total-cost figure is where a 30-year and a 15-year loan actually differ, and the donut chart makes the same point visually: at 6.5% over 30 years, the interest slice is larger than the amount borrowed.
Extra payments are worth more than they look, and worth most early. Because interest is charged on the outstanding balance, every dollar of principal paid early removes interest for the whole remaining term. On the default loan, an extra $200 a month retires it in 23 years 5 months instead of 30 and saves $105,429 in interest — a return no savings account will offer. Enter a figure in the extra payment field and the savings card quantifies it for your own numbers.
Watch what PMI costs and when it ends. Set the down payment below 20% and the PMI row appears; the note beneath estimates when your balance reaches 80% of the purchase price. On the same house with 10% down, the loan becomes $360,000, the payment rises to $2,275.44, and PMI adds $150 a month for roughly the first eight years — around $14,000 in total, buying no equity. One caution on that date: this tool uses the 80% threshold at which a borrower can typically request cancellation. Under the US Homeowners Protection Act, automatic termination on a conventional loan happens at 78% of the original value based on the original payment schedule, and requesting cancellation earlier is usually your responsibility, sometimes requiring an appraisal.
Use the month view to see the shape of the loan. The year view is the summary; switching to months shows every payment's split and is the clearest illustration of why the early years build so little equity. For the rest of the picture — what you can borrow, what a shorter term does to affordability — the loan calculator handles non-mortgage debt on the same amortization engine, the compound interest calculator shows what the same money does invested instead, and the budget planner puts the monthly figure in context. More are grouped on the calculators page.
Small print on the numbers
The currency selector changes the symbol only — there is no conversion, and number grouping stays in the US style regardless of which symbol you pick. Payments are computed in full precision and rounded only for display, whereas a real lender rounds each payment to the cent, which makes a small difference across hundreds of payments and usually leaves a final payment of a slightly different size. The payoff dates count forward from today rather than from a closing date. Nothing you enter is transmitted, stored or saved: it is arithmetic in the page, and reloading clears it.