Mortgage Calculator

How mortgage payments work

With a fixed-rate mortgage, each monthly payment covers the interest charged that month plus a portion of the original loan. Early in the loan, most of your payment goes toward interest. As the balance shrinks, more goes toward principal. The standard amortization formula calculates a fixed monthly amount that fully repays the loan over the term.

Adjustable-rate mortgages (ARMs) start with a lower fixed rate for an initial period (typically 5 or 7 years), then adjust periodically based on a market index. This calculator models fixed-rate loans — use the interest rate field to compare different rate scenarios.

Why extra payments save so much

Every extra dollar you pay goes directly toward reducing your principal balance. Because interest is calculated on the remaining balance, a smaller balance means less interest in every subsequent month — the savings compound. On a typical $400,000 mortgage at 7%, paying an extra $200 per month saves over $100,000 in interest and clears the mortgage roughly 6 years early.

Most conventional loans allow unlimited prepayment without penalty. Check your loan terms before making extra payments — some loans originated before 2014 may have prepayment penalties.

15-year vs 30-year mortgage

A 15-year mortgage typically carries a lower interest rate and saves you a substantial amount in total interest, but requires higher monthly payments. A 30-year mortgage gives you lower monthly payments and more cash flow flexibility. Use the rate buttons above to compare both options side by side — the difference in total interest is often surprising.

Understanding LTV and PMI

Loan-to-value (LTV) is the percentage of the home price you borrow. A $400,000 home with $80,000 down is 80% LTV. Lower LTV means less risk for the lender and typically better rates. Borrowers with less than 20% down (above 80% LTV) usually must pay private mortgage insurance (PMI), which adds 0.5–1.5% of the loan amount annually to your cost. Once you reach 20% equity, you can request PMI removal.