How a Mortgage Payment Is Calculated

The three inputs

Enter the amount borrowed, the annual interest rate and the loan term. The calculator converts the annual rate into a monthly rate and the term into a number of monthly payments. It then estimates a level principal-and-interest payment.

For example, a 30-year loan has 360 monthly payments. Changing the term changes both the monthly amount and the total interest, even when the borrowed amount and rate stay the same.

The formula in plain language

For a standard amortising loan, the payment is based on the loan principal, the monthly interest rate and the number of payments. The result is designed to keep the principal-and-interest payment level while the balance declines over time. Early payments usually contain more interest; later payments usually contain more principal.

The calculator also shows the estimated total repayment and interest over the selected term. Those totals depend on the assumptions you enter and on the payment schedule being monthly.

Costs this estimate does not include

• Property taxes or municipal charges.
• Home insurance, bond insurance or service fees.
• Lender arrangement fees, legal fees or closing costs.
• Variable-rate changes, early repayment charges or missed-payment costs.
• Local affordability rules and the lender’s final approval decision.

Use it as a comparison tool

Try the same borrowed amount at different rates, or compare a shorter term with a longer one. Save the lender’s formal quotation and compare its full cost with the calculator output. If the decision affects your finances, confirm the assumptions with a qualified local adviser or lender.