Mortgages
Mortgage payment calculator
Enter the amount, the rate and the term and get the payment, what the interest comes to in total, and what the loan really costs. The chart shows what happens to the payment if you stretch the term or shorten it.
The payment is one number, the cost is another
The payment comes from three ingredients only: how much you borrow, at what rate and for how long. The constant-payment formula spreads capital and interest so that their sum stays the same for the whole term, which is why the payment is predictable while the outstanding balance falls slowly at first and quickly at the end.
What gets missed is that the payment and the total cost move in opposite directions. Stretching the term lowers the payment, but every extra year is another year in which the outstanding balance earns interest. On a loan of a hundred and fifty thousand, going from twenty years to thirty can take a couple of hundred a month off and add tens of thousands to the total. Neither figure is the right one on its own: the first says what you can carry each month, the second what you are paying for the privilege.
Finally, the payment computed here is not the price of the offer. The price is the APR, which includes the compulsory costs, and two loans at the same nominal rate can cost noticeably different amounts. Use this page to see what you can sustain, and the APR to choose between proposals.
Common mistakes
- Comparing two offers by their nominal rate. The nominal rate excludes the costs; the figure to compare is the APR.
- Looking at the payment and not at the total. Stretching the term lowers the first and raises the second, and the difference can run to tens of thousands.
- Forgetting that the collection charge and any insurance sit on top of the payment.
- Assuming the principal portion is constant. On this schedule it is the payment that is constant; the principal portion grows with every payment.
Frequently asked questions
What is the difference between the nominal rate and the APR?
The nominal rate is what the payment is computed from, and nothing else. The APR also carries the valuation, the arrangement fee, the collection charge, any compulsory insurance and the taxes, and it is the only figure by which two offers can honestly be compared. Two loans at the same nominal rate can have very different APRs.
Is it worth stretching the term to lower the payment?
Up to a point. Going from twenty years to twenty-five takes a real slice off the payment; going from thirty to thirty-five takes almost nothing off and adds five years of interest. The chart on this page shows exactly where stretching stops paying for itself.
Why is almost all of my early payment interest?
Because interest is charged on the balance outstanding, which at the start is the whole amount. On a constant-payment schedule the payment stays the same but its composition shifts: mostly interest at the start, mostly principal at the end. The amortization schedule shows it payment by payment.
Is this the payment I will actually make?
It is the part that repays capital and interest. On top of it come the collection charge and, where required, the insurance. They are small next to the payment but not nothing: the APR counts them, the nominal rate does not.
What if the rate is variable?
This page computes a fixed-rate payment. On a variable rate the payment moves with the reference index, and what matters is how much of a rise you could absorb — a different calculation, with its own scenarios.
How this calculation works
Constant-payment (French) amortization. With C the amount, i the periodic rate and n the number of payments, the payment is R = C · i / (1 − (1 + i)⁻ⁿ). The periodic rate comes from the nominal annual rate divided by the number of payments in a year: i = rate / (100 · p), with p of 12 for monthly, 4 for quarterly, 3 for four-monthly and 1 for annual. The number of payments is n = years · p. Each payment's interest is charged on the outstanding balance, the principal portion is the payment minus that interest, and the total repaid is n · R. Total interest is n · R − C.
Related calculators
How much can I borrow
Affordability: the instalment you can carry and the loan it buys.
Mortgage APR
The rate that includes the charges, and which one pushes it up.
Mortgage amortization schedule
Constant installment, full amortization table and a principal/interest chart.
Variable-rate mortgage
Stress-test the instalment against a rising index.