Use this calculator to find your monthly mortgage payment amounts, given the size of your mortgage, the number of years to repay it over, and the interest rate.
It will also provide a graphical display of the ratio of interest paid to amount borrowed.
Experiment and see how decreasing the term of the mortgage, and therefore increasing the monthly repayments, can significantly reduce the amount of interest you pay. Be careful not to overstretch yourself though, especially on a variable rate mortgage.
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1. If you have a variable rate mortgage consider possible future increases in the rate, as that will increase your repayment. This shows your repayment if rates increase by 2%.
Over the lifetime of this mortgage of the payments made will be paying off interest only.
Joe and Anne Anderson have their eye on a house on the market for $250,000. They have managed to save $50,000 for a deposit, so need to take out a mortgage for $200,000. The Andersons have been tracking their expenditure for the last year, and have decided that they can afford a monthly mortgage payment of up to $1,200.
Anne picked up a brochure from their local bank which offers three fixed term mortgage deals: a 30 year term at 4.625%, a 20 year term at the same 4.625%, and a 15 year term at a discount 3.875%. They want to know which of the the three terms they can afford, and which one offers them the best deal. Luckily a friend told them about this loan calculator, and they have all the information they need to work this out for themselves.
Joe enters 200,000 in the Mortgage amount box, 30 in the Years to repay box, and 4.625 in the % Interest rate box.
After hitting Calculate the results come back: a monthly mortgage payment of $1,029. Anne also notes that the total amount they will pay over 30 years is $370,397, and of that $170,397 is in interest payments. That means interest makes up 46% of their total payments.
Next Joe changes the Years to repay to 20 years, and leaves the amount and interest rate unchanged. The results come back with a monthly loan payment of $1,279. Anne writes down the total amount payable over 20 years: $307,051, of which $107,051 (34.9%) is in interest payments.
Finally Joe changes the Years to repay to 15 years, and the % Interest rate to the 3.875% the bank offers on this short term mortgage. The results come back with a monthly payment of $1,467. The total amount payable is $264,128, and this time the interest portion of $64,128 makes up just 24.3%.
Anne draws up a table to help compare their options.
| Term | Rate | Monthly | Total | Interest | Interest / Total |
|---|---|---|---|---|---|
| 30 | 4.625% | $1,029 | $370,397 | $170,397 | 46% |
| 20 | 4.625% | $1,279 | $307,051 | $107,051 | 34.9% |
| 15 | 3.875% | $1,467 | $264,128 | $64,128 | 24.3% |
The first thing the Andersons notice is that the monthly payment increases as the term decreases, even when the interest rate remains the same. Joe points out that with their maximum monthly payment of $1,200 they should probably take the 30 year term.
Anne agrees, but then notices that this means they will pay $63,346 more than the 20 year repayment deal ($370,397 - $307,051). And on the 30 year deal, nearly half of what they pay is interest, whereas with the 20 year deal it is just a little over a third.
The monthly payment of $1,279 is just $79 a month more than they had anticipated paying, and they agree they can find this money by cutting just one night out a month. This strikes both of them as a small price to pay for the nearly $64,000 they will save, and even better they will own their home 10 years earlier compared to the 30 year term.
Joe points out that they would save even more money on the 15 year term (and own their home 5 years earlier), but they agree that a monthly payment $267 above their budget is just too expensive. They both note that shorter term loans offer big savings over long term loans, despite the fact that the monthly payment is higher.
The amount required to borrow. The price of the house less the deposit saved.
The total time taken to pay off the mortgage. For a fixed rate mortgage at the end of this period the mortgage is paid off. For an interest only mortgage it is the time at which the mortgage principal comes due. Fixed rate mortgages tend to be offered in 15, 20, 25 and 30 year terms, although other lengths are possible.
The interest rate offered on the mortgage. For a fully amortized fixed rate mortgage this is the rate for the entire term of the mortgage. Other mortgages may have a fixed rate initial period, before switching to the variable rate of the lending institution. Variable rate mortgages have rates that fluctuate according to external economic factors, and thus can only be estimated.
The amount that will be paid each month toward the mortgage. For a fixed rate mortgage this amount will remain the same for the life of the mortgage. The monthly payment on a variable rate mortgage is subject to change (it will go up or down as the underlying interest rate goes up or down).
What the monthly payment will be if rates rise by 2%. This is intended as a guide to variable rate mortgage holders using the calculator. It is recommended to re-enter a range of rates to get a feel for how things could change if you are investigating variable rate mortgages.
The total amount that will be paid to the lending institution over the life of the mortgage. That is the principal plus the total interest accrued.
The amount of interest paid over the life of the mortgage. The longer the term in years the higher this will be. Short term loans will save interest payments, but require higher monthly payments.
A graphical display of the interest total as a percentage of the total payments over the life of the loan. The longer the mortgage term, the greater the percentage of interest payments compared to principal payments.