Mortgage Calculator

How does a mortgage work?

A mortgage is a loan you take out to buy a home. When you borrow money from a lender, you're not paying back just what you borrowed. You're also paying interest, which is the lender's fee for giving you access to that money. Every month for the length of your loan (typically 15 to 30 years), you make a payment that covers two things: principal (the actual amount you borrowed) and interest (the lender's cut). The interesting part is that these two pieces shift over time. Early in your loan, most of your monthly payment goes toward interest. Your actual loan balance barely budges. But as years pass, more of each payment goes toward principal while interest shrinks. This gradual shift is called amortization, and it's why you don't pay off a 30-year mortgage in 3 years even though you're paying thousands per month.

The main factors that change your payment

Your monthly mortgage payment isn't random. It's calculated based on four specific numbers, and changing any one of them changes your payment. The loan amount is the money you're actually borrowing. If you're buying a $400,000 house and putting down $100,000, your loan amount is $300,000. Increase that to $320,000, and your monthly payment goes up proportionally. It's straightforward: bigger loan, bigger payment.

The interest rate is where things get less obvious. A difference of just 1 percent might not sound like much, but over 30 years it compounds into an enormous difference. Imagine two $300,000 mortgages. One at 6.5 percent and one at 7.5 percent. The monthly payment difference is about $180. Over 30 years, that "small" 1 percent difference costs you roughly $65,000 more in total interest. This is why shopping around for rates matters so much, and why a 0.25 percent improvement feels worth celebrating.

The loan term is how many years you have to pay back the loan. The standard options are 15 years and 30 years, though 20 and 10 year terms exist too. Here's the tradeoff: a shorter term means a higher monthly payment because you're squeezing repayment into fewer years. But you pay far less total interest. With that same $300,000 at 6.5 percent, a 15 year mortgage costs about $1,355 per month and you pay roughly $143,000 in total interest. A 30 year mortgage costs about $1,900 per month but you pay roughly $383,000 in total interest. The monthly difference is only $550, but the total interest difference is $240,000. Most people choose the 30 year term because they can afford the lower payment, even though they'll pay more overall.

Your down payment is the chunk of money you put toward the house upfront. The bigger your down payment, the smaller the loan you need to take out. A 20 percent down payment on a $400,000 house means you borrow $320,000 instead of $380,000. That $60,000 difference in the loan amount translates directly to lower monthly payments and significantly less total interest paid over the life of the loan. Down payments also matter for something called PMI (private mortgage insurance). If you put down less than 20 percent, lenders typically require PMI, which is an extra fee added to your monthly payment until you've built up enough equity.

How your payment splits between principal and interest

Understanding the principal and interest split is key to understanding why your early mortgage payments feel like they're barely touching your loan balance. When you make your first payment, almost all of it goes to interest. Let's use a concrete example: a $300,000 mortgage at 6.5 percent interest over 30 years with a monthly payment of $1,896. In month one, about $1,625 goes to interest and only $271 goes to principal. Your loan balance drops by just $271 even though you paid $1,896. This feels backwards, but it's how amortization works.

But here's what changes over time. By month 180 (halfway through a 30 year loan), the split flips. Now roughly $950 goes to principal and $946 goes to interest. They're nearly equal. By the final payment, almost $1,894 goes to principal and only $2 goes to interest. This progression is built into every mortgage and is one reason why paying off your mortgage early (if you can) saves so much on total interest. If you could pay an extra $100 toward principal each month from the start, you'd shave years off your loan and save tens of thousands in interest.

What this calculator does and doesn't include

This calculator shows you the principal and interest portion of your monthly payment. That's the meat of it. But your actual mortgage payment might be higher because lenders often bundle in other costs. Property taxes vary by location and get added to your payment. Homeowner's insurance is required by lenders and also gets wrapped in. If your down payment is less than 20 percent, PMI gets added too. Some lenders collect these funds monthly as part of your "mortgage payment" (this combination is called PITI: principal, interest, taxes, and insurance). Others handle them separately. The point is: use this calculator to understand your principal and interest, then add estimates for taxes and insurance in your area to get a full picture of what you'll actually pay each month. If you're curious about refinancing or when to remove PMI, our refinance calculator can help.

Using the amortization schedule

The calculator also gives you an amortization schedule, which is a year-by-year breakdown of your payments. You can see exactly how much principal and interest you pay each year, and watch your remaining balance shrink. This is useful for financial planning. If you're wondering when you'll hit certain milestones (like having paid off $100,000 of principal), the schedule shows you. It also reveals how much of your early payments are interest (often over 80 percent in the first year) versus late payments (where most goes to principal). Some people use this to decide whether to make extra principal payments or refinance when rates drop.

Related reading: How mortgage payments actually work, Amortization, and Principal.