How your monthly payment is calculated
Almost every fixed-rate mortgage, auto loan and personal loan uses the same amortization formula. Knowing how it works makes it much easier to judge a loan offer.
The formula
M is the monthly payment and P is the amount borrowed. r is the monthly interest rate, the annual rate divided by 12. n is the number of monthly payments, the term in years times 12. If the rate is 0%, the payment is simply P ÷ n.
A worked example
Take a $300,000 home with a $60,000 down payment, so P = $240,000, at 6.5% for 30 years.
Over 360 payments, that adds up to $546,107, of which $306,107 is interest: more than the original loan.
Why early payments are mostly interest
Each month, interest is charged on the balance you still owe, and whatever is left of the payment reduces that balance. In month one of the example, interest is $240,000 × 0.0054167 = $1,300.00, so only $216.96 goes toward the loan.
As the balance falls, the interest portion shrinks and the principal portion grows, while the payment itself never changes. In this example, the principal portion doesn't overtake interest until payment 233, more than 19 years in.
| After | Balance owed | Paid off |
|---|---|---|
| 5 years | $224,666 | 6% |
| 10 years | $203,463 | 15% |
| 15 years | $174,142 | 27% |
| 20 years | $133,597 | 44% |
| 30 years | $0 | 100% |
This is why selling or refinancing within the first few years leaves most of the original balance still owed, and why extra payments made early save the most.
Payment tables
Quick reference figures for principal and interest, calculated with the formula above. Real offers will differ with fees, taxes and insurance.
Monthly payment per $100,000 borrowed
Multiply by your loan amount in hundreds of thousands. For example, a $250,000 loan at 6.5% over 30 years is 2.5 × $632.07, or about $1,580.
| Rate | 15-year | 30-year | 30-yr total interest |
|---|---|---|---|
| 3.0% | $690.58 | $421.60 | $51,777 |
| 4.0% | $739.69 | $477.42 | $71,870 |
| 5.0% | $790.79 | $536.82 | $93,256 |
| 5.5% | $817.08 | $567.79 | $104,404 |
| 6.0% | $843.86 | $599.55 | $115,838 |
| 6.5% | $871.11 | $632.07 | $127,544 |
| 7.0% | $898.83 | $665.30 | $139,509 |
| 7.5% | $927.01 | $699.21 | $151,717 |
| 8.0% | $955.65 | $733.76 | $164,155 |
| 9.0% | $1,014.27 | $804.62 | $189,664 |
| 10.0% | $1,074.61 | $877.57 | $215,926 |
How the rate changes a $300,000, 30-year loan
Each half-point adds roughly $100 a month and $34,000 or more in interest over the life of the loan.
| Rate | Monthly | Total interest |
|---|---|---|
| 5.5% | $1,703.37 | $313,212 |
| 6.0% | $1,798.65 | $347,515 |
| 6.5% | $1,896.20 | $382,633 |
| 7.0% | $1,995.91 | $418,527 |
| 7.5% | $2,097.64 | $455,152 |
| 8.0% | $2,201.29 | $492,466 |
How the term changes it, at 6.5%
| Term | Monthly | Total interest |
|---|---|---|
| 10 years | $3,406.44 | $108,773 |
| 15 years | $2,613.32 | $170,398 |
| 20 years | $2,236.72 | $236,813 |
| 25 years | $2,025.62 | $307,686 |
| 30 years | $1,896.20 | $382,633 |
What extra payments save
The example loan: $240,000 at 6.5% over 30 years, $1,516.96 a month, with $306,107 in total interest.
| Extra paid | Paid off sooner by | Interest saved |
|---|---|---|
| $50 / month | 2 yrs 8 mo | $32,748 |
| $100 / month | 4 yrs 10 mo | $58,351 |
| $200 / month | 8 yrs 2 mo | $96,270 |
| $500 / month | 14 yrs 0 mo | $159,920 |
| $10,000 once, at the start | 3 yrs 5 mo | $52,584 |
| One extra payment a year | 5 yrs 10 mo | $69,805 |
"One extra payment a year" is modelled as $126.41 added each month, which is one-twelfth of a payment. This is roughly what a biweekly payment plan achieves.
Auto loan: $30,000 at 7%
Longer terms lower the payment, but they cost more interest and keep you owing more than the car is worth for longer.
| Term | Monthly | Total interest |
|---|---|---|
| 36 months | $926.31 | $3,347 |
| 48 months | $718.39 | $4,483 |
| 60 months | $594.04 | $5,642 |
| 72 months | $511.47 | $6,826 |
| 84 months | $452.78 | $8,034 |
What the monthly payment doesn't show
The figure above covers principal and interest only. Here's what else usually goes into the real cost of a loan, especially a mortgage.
The rest of a mortgage payment
Lenders often describe a full housing payment as PITI: principal, interest, taxes and insurance. Property taxes and homeowners insurance are frequently collected monthly into an escrow account, and the lender pays the bills when they're due. Depending on the loan, you may also pay:
- Mortgage insurance. Conventional loans with less than 20% down usually require private mortgage insurance (PMI). FHA loans have their own mortgage insurance premium (MIP), with different rules.
- HOA or condo fees. These are paid separately, but lenders count them when deciding what you can afford.
- Flood or other required insurance in some areas.
Illustrative example, not a local estimate
Taxes and insurance vary widely by location and property, so check real figures on your Loan Estimate.
Interest rate vs. APR
The interest rate determines your monthly payment. The annual percentage rate (APR) adds most lender fees and discount points to the interest cost and expresses the total as a yearly rate. That makes APR the better number for comparing offers, while the interest rate is the one to enter in this calculator.
Discount points and closing costs
A discount point costs 1% of the loan amount and lowers your rate by an amount the lender sets. Whether points pay off depends on how long you keep the loan. Divide the cost of the points by the monthly savings to find your break-even point in months. The comparison tool above includes an upfront-fees field so you can test this.
Closing costs also include items such as appraisal, title and origination fees. These don't change your monthly payment unless you roll them into the loan, but they are part of what the loan really costs you.
How mortgage insurance ends
For most conventional loans, the federal Homeowners Protection Act lets you ask to cancel PMI once your balance is scheduled to reach 80% of the home's original value, and requires it to end automatically at 78%, as long as you're current on payments. FHA mortgage insurance follows separate rules, and on many FHA loans it lasts for the life of the loan unless you refinance.
How much can you comfortably borrow?
Lenders look closely at your debt-to-income ratio (DTI): your monthly debt payments divided by your gross (pre-tax) monthly income. A traditional guideline is the 28/36 rule. It suggests keeping housing costs at or below 28% of gross income, and all debt payments, housing included, at or below 36%.
Many loan programs approve higher ratios, but being approved for a payment doesn't mean it fits your budget. Lenders don't see childcare, savings goals or how stable your income is.
Questions to ask yourself first
- Could you still pay if your income dropped? Many advisers suggest keeping several months of expenses in an emergency fund on top of your down payment and closing costs.
- How long will you keep the loan? If you're likely to move or refinance within a few years, a lower rate from paying points may never pay back its cost.
- Is the rate fixed? With an adjustable rate, work out the payment at the highest rate the loan's caps allow, not just the starting rate.
- What's the total cost, not just the payment? A longer term can make almost anything look affordable monthly while adding tens of thousands in interest.
Ways to pay less interest
Pay extra toward principal
Any amount above your required payment reduces the balance that future interest is charged on. Tell your servicer to apply it to principal, and check that your loan has no prepayment penalty. Extra payments shorten the loan; your required monthly payment stays the same.
Make biweekly payments
Paying half your monthly payment every two weeks adds up to 26 half-payments, the equivalent of 13 monthly payments a year. Many lenders let you make the extra payment directly, so avoid third-party services that charge a fee for the same result.
Choose a shorter term
On a $300,000 loan at 6.5%, a 15-year term costs $717 more a month than a 30-year term but saves over $212,000 in interest. Shorter terms often come with lower rates too, which widens the gap.
Refinance when the numbers work
Divide your closing costs by the monthly savings to get the break-even point: $6,000 in costs ÷ $150 saved a month = 40 months. Starting a new 30-year term can raise your total interest even at a lower rate, so compare the total cost as well as the payment.
Recast after a lump sum
Some lenders will "recast" a mortgage after a large principal payment, usually for a fee. They recalculate your payment over the remaining term, which lowers the monthly payment instead of shortening the loan.
Improve your credit before applying
Your credit score is one of the biggest factors in the rate you're offered. Paying down card balances and fixing report errors a few months before you apply can make a noticeable difference to your offers.
Understanding the four loan types
Mortgage
A mortgage is secured by the home, which is why it has long terms (usually 15 or 30 years) and lower rates than unsecured debt. Minimum down payments range from 0% for VA and USDA loans, to around 3% for some conventional loans and 3.5% for FHA loans. Putting down less than 20% on a conventional loan usually means paying PMI. This calculator models a fixed-rate mortgage.
Fixed vs. adjustable. An adjustable-rate mortgage (ARM) starts with a fixed rate for a set period and then adjusts at regular intervals based on a market index. A 5/6 ARM, for example, is fixed for five years and then adjusts every six months. Caps limit each adjustment and the lifetime increase. For an ARM, this calculator's schedule is only accurate for the initial fixed period.
Auto loan
An auto loan is secured by the vehicle and typically runs 3 to 7 years. Cars lose value quickly, so a long loan with a small down payment can leave you owing more than the car is worth, known as negative equity. That becomes a problem if you sell, trade in or total the car. A shorter term or larger down payment reduces that risk.
Personal loan
Most personal loans are unsecured, with no collateral behind them. That's why their rates are usually higher than mortgage or auto rates and depend heavily on your credit and income. Terms are typically 1 to 7 years. Check for an origination fee, which is often deducted from the amount you receive.
Student loan
Federal student loans have fixed rates set for each school year, and the standard repayment plan has traditionally run for 10 years. They also come with options such as income-driven repayment, deferment and forbearance, which this calculator doesn't model. Federal repayment plans have changed several times in recent years, so check studentaid.gov or your servicer for current terms. Private student loans work more like personal loans, and their rates depend on your credit.
Before you sign: a checklist
- Get several quotes on the same day. Rates change daily, so comparing offers from different days can be misleading. For mortgages, a lender must give you a standard Loan Estimate within three business days of your application, which makes offers easy to compare line by line.
- Compare the APR and the total cost, not just the monthly payment. Use the comparison tool above and include each offer's upfront fees.
- Check for a prepayment penalty, so you know whether extra payments or an early payoff will cost you.
- Ask how long the rate lock lasts and what happens if closing is delayed.
- Read the Closing Disclosure. For most mortgages you must receive it at least three business days before closing. Compare it with your Loan Estimate and ask about anything that changed.
- Confirm the payment you'll actually owe, including escrow for taxes and insurance, and make sure it fits your budget with room to spare.
Glossary
- Principal
- The amount you borrow: the purchase price minus your down payment. Also the part of each payment that reduces the balance.
- Interest rate
- The yearly rate charged on the balance you owe. It's divided by 12 to get the monthly rate used in the payment formula.
- APR
- Annual percentage rate: the interest rate plus most lender fees and points, expressed as a yearly rate. Useful for comparing offers.
- Amortization
- Paying off a loan in equal installments, where early payments are mostly interest and later payments are mostly principal.
- Term
- How long you have to repay the loan, usually in years for mortgages and months for auto loans.
- Down payment
- Cash paid upfront toward the purchase. A larger down payment reduces the loan amount and can lower your rate or remove mortgage insurance.
- Loan-to-value (LTV)
- The loan amount divided by the property's value. $240,000 borrowed on a $300,000 home is 80% LTV.
- Debt-to-income (DTI)
- Monthly debt payments divided by gross monthly income. Lenders use it to judge whether you can afford a new payment.
- Discount points
- An upfront fee, 1% of the loan per point, paid to lower the interest rate.
- Escrow
- An account your servicer uses to collect and pay property taxes and insurance on your behalf.
- PMI / MIP
- Mortgage insurance that protects the lender, usually required with less than 20% down (PMI) or on FHA loans (MIP).
- Prepayment penalty
- A fee some lenders charge if you pay off all or part of a loan early.
- Negative equity
- Owing more on a loan than the asset is worth. Common in the early years of long auto loans.
- Recast
- Recalculating the payment on an existing loan after a large principal payment, keeping the same rate and end date.
Frequently asked questions
Does this calculator give me an official loan offer?
No. It gives an estimate based on the numbers you enter. Real offers depend on underwriting, including your credit history, income, the property and each lender's fees.
Why is my real payment higher than the estimate here?
The estimate covers principal and interest only. A real mortgage payment usually also includes property taxes and homeowners insurance paid through escrow, and possibly mortgage insurance. See what the monthly payment doesn't show for an example.
Should I enter the interest rate or the APR?
Enter the interest rate. APR includes fees spread over the loan's life, so using it in the payment formula overstates the monthly payment slightly. Use APR when comparing offers.
Does the calculator assume a fixed or variable rate?
A fixed rate for the full term. For an adjustable-rate loan, the schedule only applies to the initial fixed period. Re-run it at the highest rate the loan's caps allow to see a worst case.
Does paying extra lower my monthly payment?
Not normally. Extra principal payments shorten the loan and cut total interest, but the required payment stays the same unless your lender recasts the loan.
How much does an extra payment really save?
On a $240,000, 30-year loan at 6.5%, an extra $100 a month saves about $58,000 in interest and pays the loan off nearly 5 years early. Early extra payments save the most, because they reduce the balance for every remaining month.
Is a 15-year or 30-year mortgage better?
A 15-year loan has higher payments but costs far less in total. On $300,000 at 6.5%, it saves over $212,000 in interest. A 30-year loan offers a lower, more flexible payment, and you can still pay extra when you're able. The right choice depends on your budget and other goals.
What is a good interest rate?
It depends on the loan type, your credit, your down payment and the market at the time. For context, Freddie Mac's weekly survey of 30-year fixed rates has ranged from a high of 18.63% in 1981 to a low of 2.65% in January 2021. Compare several same-day quotes to judge whether a current offer is competitive.
How is the payoff date worked out?
It assumes your first payment is due next month and every payment is made on time. Your actual first payment date is set at closing and is shown in your loan documents.
Is my information stored or shared?
No. All calculations run in your browser, and nothing you type is sent to a server or saved. See the Privacy Policy for details about the site.
About these calculations
EasyLoanCalculator is an independent educational tool. Payments use the standard fixed-rate amortization formula shown above, calculated monthly and rounded for display. Regulatory details on this page reflect U.S. rules as described by the Consumer Financial Protection Bureau (consumerfinance.gov). This page is for general information only and is not financial, legal or tax advice. For decisions about a specific loan, speak to a licensed lender or a qualified financial adviser. Last reviewed: September 2026. Spotted an error? Contact us.