How mortgage payments are calculated
A standard (annuity) mortgage is repaid with the same payment every month. At the start most of that payment is interest; as the balance falls, more and more goes to principal. The payment for principal and interest comes from this formula:
Formula M = P × r × (1 + r)n ÷ ((1 + r)n − 1)
M is the monthly payment, P the loan amount, r the monthly rate (annual rate ÷ 12) and n the number of payments (years × 12). Example: $340,000 at 7% for 30 years → r = 0.005833, n = 360 → M = $2,262. In Canada the rate is compounded semi-annually, so r = (1 + rate/2)1/6 − 1 — this calculator handles both.
What is included in your monthly payment (PITI)
Lenders and this calculator talk about PITI: principal, interest, taxes and insurance. Many owners also pay:
- Property tax — in the US usually 0.3–2.5% of the home value per year depending on the state; often paid monthly into an escrow account.
- Homeowners insurance — commonly $1,500–$3,000 a year in the US, less in most of Europe.
- PMI — required on conventional loans with less than 20% down. It ends automatically when the balance reaches 78% of the original value; you can ask to cancel it at 80%.
- FHA MIP / USDA fee — government-backed loans charge an upfront premium (financed) and an annual premium.
- HOA fees — for condos and planned communities.
Monthly payment per 100,000 borrowed
Principal and interest only, monthly payments. Multiply by your loan size — e.g. a 300,000 loan costs three times the value shown.
| Rate | 15 yrs | 20 yrs | 25 yrs | 30 yrs |
|---|---|---|---|---|
| 3 % | 691 | 555 | 474 | 422 |
| 3.5 % | 715 | 580 | 501 | 449 |
| 4 % | 740 | 606 | 528 | 477 |
| 4.5 % | 765 | 633 | 556 | 507 |
| 5 % | 791 | 660 | 585 | 537 |
| 5.5 % | 817 | 688 | 614 | 568 |
| 6 % | 844 | 716 | 644 | 600 |
| 6.5 % | 871 | 746 | 675 | 632 |
| 7 % | 899 | 775 | 707 | 665 |
| 7.5 % | 927 | 806 | 739 | 699 |
| 8 % | 956 | 836 | 772 | 734 |
How extra payments save you money
Every extra payment goes straight to principal, so you stop paying interest on that amount for the rest of the loan. On a $300,000, 30-year loan at 7%, paying $200 extra each month saves more than $115,000 in interest and ends the loan about 7 years early. Switching to accelerated bi-weekly payments (half the monthly payment every two weeks) adds one extra monthly payment per year. Check your contract for prepayment penalties first — many European loans limit free extra payments (e.g. 5% a year in Germany).
Mortgages in the US, Canada, the UK and Europe
The maths is the same everywhere, but the conventions differ. Pick your market in the calculator to load sensible defaults:
- United States — 30-year fixed is the norm, rates are fixed for the whole term. PMI, FHA, VA and USDA rules apply; APR is quoted as a nominal rate.
- Canada — 25-year amortization with a 5-year term, semi-annual compounding by law, CMHC insurance below 20% down.
- United Kingdom — 2- or 5-year fixed deals, then the lender’s variable rate; lenders cap borrowing at about 4.5× income. Repayment or interest-only.
- Germany & Austria — you choose an initial repayment rate (anfängliche Tilgung, usually 2–3%) and a fixed-rate period (Zinsbindung) of 10–15 years; the balance left after it (Restschuld) is refinanced. Purchase side costs are 9–12%.
- France & Belgium — fixed rates, 20–25 years, borrower insurance on top of the rate and a 35% maximum debt ratio (HCSF rule). Notary fees about 7–8% for existing homes.
- Spain — fixed, variable (Euribor + spread) or mixed mortgages, usually up to 80% of the value; buying costs 10–12%.
Interest rate vs. APR
The interest rate sets your payment. The APR (in the EU: TAEG, Effektivzins, APRC) also includes points, lender fees and mortgage insurance, so it is the better number to compare offers. The US quotes APR as a nominal yearly rate; Europe and the UK use the effective annual rate, which is slightly higher. Switch between them under “Customize”.
Tips before you sign
- Keep your total housing cost below about 28–35% of income and all debts below 36–43%.
- Compare at least three offers on the same day — use the Compare tab with the years you really expect to keep the loan.
- Points only pay off after the break-even period — usually 5–7 years.
- Budget 1–2% of the home value per year for maintenance on top of your mortgage.
- A 15-year loan has a higher payment but can cut total interest by more than half.
Results are estimates for planning only and are not an offer or financial advice. Taxes, insurance and fees vary by location and lender — confirm the numbers with your lender’s official Loan Estimate or ESIS.