How Is a Mortgage Payment Calculated?
A mortgage payment is calculated using the formula M = P[r(1+r)n] / [(1+r)n – 1], where P is the loan amount, r is the monthly interest rate, and n is the total number of payments. This formula ensures each monthly payment is the same amount over the entire loan term.
For example, a $300,000 mortgage at 6.5% annual interest for 30 years has a monthly payment of $1,896.20. The monthly rate is 6.5% / 12 = 0.5417%, and total payments are 30 × 12 = 360. In the early years, most of each payment goes toward interest. Over time, more goes toward reducing the principal balance.
How Much Interest Do You Pay on a 30-Year Mortgage?
On a typical 30-year mortgage, you often pay more in total interest than the original loan amount. A $300,000 loan at 6.5% results in approximately $382,633 in total interest over 30 years — meaning you pay $682,633 total for a $300,000 home.
This is why many financial advisors recommend considering 15-year mortgages when affordable. The same $300,000 at 6.5% over 15 years costs $170,388 in total interest — saving over $212,000 compared to the 30-year term, though the monthly payment is higher at $2,613.32.
How Do Extra Payments Reduce Your Mortgage?
Extra monthly payments go directly toward reducing the loan principal, which lowers total interest and shortens the loan term. Even modest extra payments can save tens of thousands of dollars over the life of a mortgage.
For example, adding just $200 per month to a $300,000 mortgage at 6.5% for 30 years saves approximately $82,000 in interest and pays off the loan roughly 5 years early. Adding $500 per month saves around $155,000 and shortens the term by nearly 10 years. Use this calculator's extra payment feature to see your specific savings.
What Is an Amortization Schedule?
An amortization schedule is a complete table showing how each payment is split between principal and interest over the entire loan term. It reveals the gradual shift from interest-heavy payments at the start to principal-heavy payments at the end.
In the first year of a $300,000 mortgage at 6.5%, approximately $19,354 goes to interest and only $3,401 reduces the principal. By year 25, those proportions reverse: roughly $6,090 goes to interest and $16,665 reduces the principal. This calculator generates a complete yearly amortization schedule automatically with every calculation.
Disclaimer: This calculator is for educational and informational purposes only. It does not constitute financial advice. Results are estimates based on the inputs provided and do not include property taxes, homeowner's insurance, PMI, or HOA fees. Actual mortgage payments may differ. Consult a qualified financial advisor or mortgage professional before making borrowing decisions.