Understanding Your Mortgage Payment
A mortgage loan typically consists of two main parts: Principal and Interest. In the early years of a loan, most of your monthly payment goes toward paying off interest.
Buying a car? Car loans work slightly differently due to depreciation. Use our specific Auto Loan Calculator for accurate vehicle estimates.
Visualizing Amortization
Interest
Principal
Interest (Red) dominates early payments, while Principal (Green) accelerates later.
What is an Amortization Schedule?
An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment.
The Monthly Payment Formula
M=P
i(1 + i)n
(1 + i)n − 1
- M = Total monthly payment
- P = Principal loan amount
- i = Monthly interest rate (Annual Rate ÷ 12)
- n = Number of months (Years × 12)
How to lower your total interest?
- Shorten the term: Switching from a 30-year to a 15-year loan increases monthly payments but drastically reduces total interest.
- Extra payments: Paying even $50 extra per month goes 100% toward the principal.
- Lower rates: Refinancing to a lower interest rate can save thousands over the life of the loan.