Home Loan Payment Calculator: Easy Monthly Estimates

How the monthly payment is worked out

Most people call it a mortgage payment, but it is really four bills bundled into one. Lenders shorten it to PITI: principal, interest, taxes and insurance. Principal and interest are fixed by the loan itself; taxes and insurance are usually collected by the lender each month and held in escrow until the annual bills come due.

M = P × [ r(1 + r)ⁿ ] ÷ [ (1 + r)ⁿ − 1 ]

P is the amount borrowed, r is the monthly interest rate and n is the number of payments. Early payments are mostly interest; the balance tips toward principal as the loan ages.

Why an extra $100 a month does so much

Every dollar above the required payment goes straight to the principal, and it never earns interest for the lender again. On a 30-year loan a modest extra payment in the early years can cut several years off the term and save tens of thousands in interest.

Bi-weekly and fortnightly payments

Instead of one payment a month, you pay half of it every two weeks. With 52 weeks in a year that comes to 26 half-payments — the equivalent of 13 monthly payments instead of 12. Australians know the same trick as fortnightly repayments. Check first that your lender applies the extra to the principal rather than holding it for the next due date.

Down payment and mortgage insurance

Put down less than 20% and lenders add insurance that protects them, not you. In the US that is PMI, roughly 0.3%–1.5% of the loan a year, dropping off once you owe 80% or less. In Australia the equivalent LMI is normally a one-off premium, so treat the monthly figure here as a rough spread of that cost.

This tool gives an estimate for planning only. Confirm the numbers with a lender or licensed broker before you commit to a loan.