How the mortgage calculator works
This calculator takes the price of the home and subtracts your down payment to find the amount you actually borrow. It then spreads that loan over the term you choose using a fixed interest rate, which is how a standard fixed-rate mortgage works. The result is a single monthly payment that covers both interest and principal, plus a complete amortization table showing what happens to the balance every month.
The optional extra payment field lets you test a simple idea: what if you paid a little more than required each month? Every extra dollar goes straight to the principal, so the balance falls faster, the interest charged next month is lower, and the loan ends earlier. The calculator runs the schedule twice, once without extra money and once with it, and reports the difference.
The figure shown is principal and interest only. Taxes, insurance and association fees vary by location and lender, so add your own estimate for a full monthly budget.
The formula behind the payment
A fixed-rate loan uses the standard annuity formula. With a monthly rate r (the annual rate divided by 12) and n total monthly payments:
Payment = P × r / (1 − (1 + r)−n)
Here P is the amount borrowed. Each month the interest portion is the current balance multiplied by r, and whatever is left of the payment reduces the balance. Early in the loan the balance is large, so most of the payment is interest. As the balance shrinks, the interest portion shrinks and the principal portion grows. If the rate is exactly zero the formula simplifies to the loan amount divided by the number of months.
Worked example
Suppose you buy a $350,000 home with $70,000 down, so you borrow $280,000. The rate is 6.5% for 30 years. The monthly rate is 0.5417%, there are 360 payments, and the formula gives a payment of $1,769.79. In the first month $1,516.67 is interest and only $253.12 reduces the loan. Over the full term you would pay $357,125 in interest, which is more than the amount borrowed.
Now add $200 per month. The calculator shows the loan is paid off in 22 years 9 months instead of 30 years, and total interest drops by $101,283. That is the compounding effect of attacking principal early, when the balance is highest.
Tips for using the results
- Compare terms. Run 15 and 30 years side by side. The shorter term has a higher payment but far less total interest.
- Check affordability first. Many lenders look at the share of income that goes to housing and debt. Use the payment plus taxes and insurance, not the payment alone.
- Confirm there is no prepayment penalty before relying on extra payments, and tell the servicer that extra money should be applied to principal.
Frequently asked questions
Does this mortgage calculator include property tax and insurance?
No. It calculates principal and interest only. Property tax, homeowners insurance, mortgage insurance and any association fees vary by location and lender, so add your own estimates to the monthly payment shown for a more complete housing budget.
How do extra payments reduce what I owe?
Extra money is applied entirely to principal. A lower balance means less interest is charged the following month, so more of every later payment goes to principal. The effect compounds, which is why the loan ends years earlier and total interest falls.
Why is so much of my early payment interest?
Interest is charged on the outstanding balance, which is at its highest at the start. In a fixed-payment loan the interest share is large in the first years and falls steadily as the balance declines, which the amortization table makes visible.
Is a 15-year or 30-year mortgage better?
It depends on your budget and goals. A 15-year loan costs much less in total interest but has a higher monthly payment. A 30-year loan lowers the payment and keeps cash flow flexible, and you can still make extra payments voluntarily.