About the Simple Mortgage Calculator

What is a mortgage?

A mortgage is a long-term loan secured by real property, usually a house or land. The borrower repays the borrowed amount with interest over a fixed number of years, and the property serves as collateral until the loan is fully repaid.

Purpose of this calculator

The Simple Mortgage Calculator estimates your regular loan payment and the total interest you will pay over the life of the loan. It helps you understand affordability, compare loan options, and plan for long-term financial commitments.

Key fields used in this calculator

• Loan Amount: The principal borrowed from the lender to purchase or refinance a property. It excludes down payment or any upfront fees.
• Annual Interest Rate (%): The cost of borrowing expressed as a yearly percentage. It determines how much interest accrues on the outstanding balance.
• Term (Years): The duration of the loan — typically 10, 15, 20, or 30 years. Longer terms reduce monthly payments but increase total interest.

How it works

Monthly rate (r) = Annual interest / 12 / 100
Number of payments (n) = Years × 12
Monthly payment (M) = P × r × (1 + r)^n / ((1 + r)^n - 1)
Where:
  P = Loan amount
  r = Monthly interest rate
  n = Number of months
      

Types of mortgage

• Fixed-Rate Mortgage (FRM): Interest rate and monthly payment remain constant throughout the loan term. Best for borrowers who prefer predictable payments.
• Variable or Adjustable-Rate Mortgage (ARM): The interest rate changes periodically based on a market index. Payments may rise or fall over time. Often starts with a lower initial rate than a fixed loan but carries rate risk later.

Advantages of understanding your mortgage

• Improves budgeting by revealing total cost of borrowing.
• Helps choose between short-term vs. long-term financing.
• Enables early repayment planning to save on interest.

Considerations and limitations

• Calculator assumes fixed rate and regular payments (no taxes or insurance included).
• Actual lender offers depend on credit score, down payment, and income profile.
• For variable-rate loans, only the starting rate is used; future adjustments are not modeled.

How to reduce interest cost

• Increase your down payment to reduce principal.
• Choose a shorter term if affordable; it sharply lowers total interest.
• Make occasional extra principal payments early in the loan.
• Refinance when market rates drop significantly.

Interpreting your results

• Monthly Payment: Regular principal + interest installment due each month.
• Total Interest: Aggregate interest paid over the term.
• Total Payment: Sum of all installments (Principal + Interest).

Note: This is a simplified estimate. Real mortgage payments often include property taxes, homeowners insurance, and possibly mortgage insurance. Always review official loan documents and consult your financial advisor before making decisions.