Mortgage calculator
Two questions everyone asks before buying a home: what will I pay each month, and how much can I afford? This calculator answers both, with the total interest, the savings you need to get in and the share of your pay the repayments would take.
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Your numbers
Choose what you want to know at the top. Rate, term and costs come with typical values: replace them with the ones on your offer.
You would pay a month
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- Mortgage
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- Monthly payment
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- Savings needed (down payment and costs)
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- Total interest
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- Total repaid
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See the amortization schedule
How a mortgage payment is calculated
Most mortgages are repayment (amortizing) loans: you pay the same amount every month while the rate stays the same, and each payment is part interest and part principal. At the start it is mostly interest, because interest is charged on what you owe and at the start you owe a lot. Over the years that balance flips.
The formula is payment = P × r / (1 − (1 + r)−n), where P is the amount borrowed, r the monthly interest rate (the annual rate divided by 12) and n the number of payments (years times 12). The calculator does exactly that, and the amortization schedule above comes from applying it month by month.
To give you a feel without touching anything, this is the monthly payment on a $300,000 mortgage at different rates and terms:
| Rate | 15 years | 20 years | 30 years |
|---|---|---|---|
| 5% | $2,372 | $1,980 | $1,610 |
| 5.5% | $2,451 | $2,064 | $1,703 |
| 6% | $2,532 | $2,149 | $1,799 |
| 6.5% | $2,613 | $2,237 | $1,896 |
| 7% | $2,696 | $2,326 | $1,996 |
At 6% over 30 years you would pay $1,799 a month, and by the end you would have paid $347,515 in interest on top of the $300,000 you borrowed. A longer term lowers the payment but makes the home far more expensive.
How much you need saved before you buy
Lenders rarely lend the full price. The loan-to-value (LTV) is the share of the home's value they will cover: at 80% LTV you put down 20%. Some lenders go to 90% or 95%, usually at a higher rate or with mortgage insurance on top.
On top of the down payment come buying costs, which are normally not financed: transfer or stamp taxes, legal and notary fees, valuation, lender fees and title or registration costs. Depending on the country they range from around 2% of the price to more than 10%.
That is why the calculator asks for costs as a percentage. Put in the figure for where you are buying, and the result shows the total savings you need: down payment plus costs.
How much you can really afford
Most lenders look at how much of your income goes on debt repayments. A common ceiling is somewhere between 30% and 40% of take-home pay for all repayments together, which is why the «How much can I afford?» mode subtracts what you already pay on other loans: a car loan counts just like the mortgage.
The useful part is seeing what holds you back. If it is savings, your income could carry a bigger payment but you do not have enough for the down payment and costs. If it is income, you have enough to put down but the payment cannot stretch further. They are different problems with different fixes: the first is solved by saving for longer, the second by a longer term, a better rate or buying with a partner.
What a lender will lend is not the same as what suits you. The ceiling is a maximum, not a target: with repayments at 25% to 30% of your pay there is room to keep saving, to absorb surprises and to cope if a variable rate goes up.
Fixed, variable or a mix
With a fixed rate the payment does not change for the fixed period, so you know exactly what you will pay. With a variable or tracker rate the payment moves with a reference rate. Many mortgages combine the two: fixed for a few years, then variable.
To compare offers, look at the APR, which adds fees and some costs to the interest. The payment itself is worked out from the plain interest rate, and that is the one to enter in the calculator.
If the rate is variable, try adding a couple of points in the calculator before you sign. If that payment would choke you, the risk is more than you should be taking on.
After you sign: the mortgage inside your net worth
A home with a mortgage does not add its full value to your net worth, only its value minus what is left to pay. At first that is little more than the down payment, and it grows every month with the principal part of the payment.
In Neto you can record the home and the mortgage and watch your net worth change month by month alongside the rest of your accounts, without connecting your bank. If you are saving for the down payment, savings goals tell you how much to set aside each month to get there on time.
The other calculators
Frequently asked questions
How much will a lender let me borrow?
Usually up to a set share of the home's value (often 80%, sometimes 90% or more), as long as all your repayments stay under roughly 30% to 40% of your take-home pay. The «How much can I afford?» mode applies both limits at once and tells you which one holds you back.
What income do I need for a $300,000 mortgage?
At 6% over 30 years the payment is about $1,799 a month. To keep it under 35% of take-home pay you would need around $5,140 a month with no other debts, or about $6,000 to stay at 30%. With a different rate or term, the calculator gives you the exact figure.
Does the payment include taxes and insurance?
No. It is the loan repayment only: principal and interest. Property taxes, home insurance and any mortgage insurance are paid on top, either separately or through the lender, so add them when you budget.
Is it better to overpay to shorten the term or to lower the payment?
Shortening the term saves more interest, because you stop paying interest for the years you cut. Lowering the payment gives you more room each month. If the payment is already comfortable, shortening the term usually works out cheaper.
Does this work for any lender?
Yes: the payment on a fixed-rate repayment mortgage is calculated the same way everywhere. What changes from lender to lender is the rate, the fees and any products they ask you to take. It is an information tool: the binding offer comes from the lender.