Mortgage Calculator

The formula

M = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

M is the monthly principal and interest, P is the amount you borrow, r is the annual rate divided by twelve, and n is the number of monthly payments. That's the whole thing. Taxes, insurance, PMI and HOA get added on top afterwards, and they're not part of the loan.

A worked example, run through the same code the calculator uses. Take a $425,000 house with 20% down, so you borrow $340,000. At 6.67% over 30 years the principal and interest come to $2,187 a month. Keep that loan to term and you pay $447,386 in interest, which is 132% of what you borrowed on top of paying it back.

Reading the amortization schedule

The amount paid changes little over time; however, the way in which the money is allocated to principal vs. interest does change. This surprise some people. For example, during the first year of the example provided above, it was mostly interest that each month's payment would be applied to and only a small fraction would apply directly to the outstanding (balance). However by the end of several months/years this will have changed. Nothing "unfair" or "underhanded" has occurred. The total amount owed is highest initially. Interest is then calculated on the initial amount owed, thus the largest percentage of the monthly payment will be interest.

That is why paying down some of what you owe earlier in the term will be well worth a lot more money than the same amount paid at a later date. The earlier payment eliminates a portion of the principal which would otherwise have been subject to interest charges for years (decades) into the future. To demonstrate this impact on your personal numbers if you currently have a mortgage, click on the mortgage payoff calculator link. Use the amortization calculator link if you want to view the payment-by-payment schedule for a car or student loan instead of a mortgage.

Why the rate box starts where it does

Most mortgage calculators open with an empty rate field or a round number someone picked years ago. This one starts at 6.67%, Freddie Mac's national average for the week ending 2026-08-13. Over the past year that average has run between 5.98% and 6.69%. A tenth of a point sounds trivial and isn't: on the example loan it's roughly $8,126 more interest over thirty years.

Your own quote will differ from the survey, and it should. The average describes a borrower with strong credit putting twenty percent down on a conforming loan. Change any of those and the price changes. Use the average to sanity-check a quote, not to predict one.

What this leaves out

There are no closing costs shown and these will be a couple of percent of your purchase price. In addition to closing costs there is no representation of monthly maintenance, utility bills, or any repair you may have to make as soon as you move into your new home. Both property taxes and insurance are just guesses (estimated) since both vary greatly from location to location. To answer the larger question of how well this all fits together, please run the budget and cash flow tracker and the emergency fund calculator first.