Mortgage
Long-term home loan amortization.
What does Mortgage mean?
A mortgage is a long-term loan used to buy a home or property. The property itself serves as collateral. You repay the loan in monthly installments over a fixed period (typically 15 or 30 years), which include both principal and interest. Understanding your mortgage payment helps you determine how much house you can afford.
How to calculate Mortgage
The monthly mortgage payment uses the same annuity formula as a standard loan: M = L × r(1+r)^n / ((1+r)^n − 1), where L is the loan amount (home price minus down payment), r is the monthly interest rate, and n is the total number of months. For example, a $300,000 home with 20% down at 6% for 30 years: loan = $240,000, monthly payment ≈ $1,439.
FAQ
Conventional mortgages typically require 5–20% down. Putting down 20% or more avoids private mortgage insurance (PMI) and reduces your monthly payment. Some government-backed loans (FHA, VA) allow as little as 0–3.5% down.
A 15-year mortgage has higher monthly payments but saves significantly on total interest — often more than half compared to a 30-year term. A 30-year mortgage offers lower monthly payments and more flexibility. Choose based on your budget and financial goals.
On a $240,000 loan over 30 years, a 1% rate increase (e.g., 5% to 6%) adds roughly $160/month and over $55,000 in total interest. Even a 0.25% difference matters over the life of a mortgage, so shopping for the best rate is important.
A mortgage is a specific type of loan secured by real estate. The calculation is the same as an annuity loan payment, but mortgages typically involve a down payment, longer terms (15–30 years), and may include additional costs like property tax and insurance.
This calculator shows only principal and interest (P&I). Your actual monthly housing cost will also include property taxes, homeowner insurance, and possibly PMI or HOA fees. These can add 20–40% to the base payment.
Related calculators
- Loan Payment— Monthly payment for borrowed amount.
- Compound Interest— Growth of money with reinvested interest.
- ROI— Return relative to investment cost.
- Inflation— Purchasing power decrease over time.