How the monthly payment is calculated
Most loans use equal payments (an amortizing loan): you pay the same amount every month. Early payments are mostly interest; later ones are mostly principal.
Payment = P × r ÷ (1 − (1 + r)−n), where P is the loan amount, r is the annual rate ÷ 12 and n is the number of monthly payments. For 300,000 at 6.5% over 30 years, r = 0.0054167 and n = 360, so the payment is 1,896.20 a month and the total interest is 382,633.47.
With equal principal, you repay the same share of the principal every month plus interest on what is left. The first payment is the largest and each one after it is smaller. The same 300,000 loan starts at 2,458.33 a month and costs 293,312.50 in interest, about 89,000 less, because the balance falls faster. This method is common in Taiwan, China and parts of Europe.
Interest-only periods
During an interest-only period (called a grace period in Taiwan) you pay only the interest, so the balance does not fall. Afterwards the full amount has to be repaid over the remaining years, so the payment jumps and the total interest goes up.
Paying extra: shorter term or lower payment?
An extra payment goes straight to the principal, so every later month charges less interest. Lenders usually let you choose what happens next:
- Shorter term: the payment stays the same and the loan ends early. This saves the most interest.
- Lower payment (sometimes called recasting): the end date stays the same and the payment drops.
For 300,000 at 6.5% over 30 years, paying 50,000 extra at the end of year 5 ends the loan 8 years 4 months early and saves about 140,800 in interest. Keeping the term instead lowers the payment from 1,896.20 to 1,558.60 and saves about 51,300.
Some loans charge a prepayment penalty, usually a percentage of the amount paid early in the first few years. The calculator subtracts it from the interest saved.
Monthly payment per 100,000 borrowed
Equal payments, rounded to the cent. For 250,000, multiply by 2.5.
| Rate | 15 years | Total interest | 30 years | Total interest |
|---|---|---|---|---|
| 4% | 739.69 | 33,144 | 477.42 | 71,870 |
| 5% | 790.79 | 42,343 | 536.82 | 93,256 |
| 6% | 843.86 | 51,894 | 599.55 | 115,838 |
| 7% | 898.83 | 61,789 | 665.30 | 139,509 |
FAQ
Does this include taxes and insurance?
No. It covers principal and interest only. A US mortgage payment often also includes property tax, homeowners insurance and mortgage insurance, which depend on where you live and your lender.
Why is my lender’s number a few cents different?
This calculator keeps exact values and rounds only for display. Lenders round each payment to the cent and adjust the last one, so totals can differ slightly. Your loan statement is the final word.
What about variable rates?
The calculator assumes the rate stays the same for the whole term. When a variable rate changes, run it again with the remaining balance and the remaining years.