Loan Payment Calculator
Calculate the monthly payment, total interest and payoff date for any fixed-rate loan, and see exactly what an extra monthly payment would save you.
Where the money actually goes
Each month, interest is charged on whatever balance remains. The fixed payment covers that interest first, and only what is left over reduces the principal. Because the balance falls slowly at the start, the interest portion stays large for years.
This is also why the total interest on a long loan can approach or exceed the amount borrowed. Doubling the term does not halve the cost — it roughly doubles the interest while reducing the monthly payment by much less than half.
Term length compared
On 250,000 at 6.5 percent, principal and interest only:
| Term | Monthly | Total interest |
|---|---|---|
| 15 years | 2,178 | 142,065 |
| 20 years | 1,864 | 197,381 |
| 30 years | 1,580 | 318,861 |
The 30-year payment is 27 percent lower than the 15-year one, but costs more than twice as much in interest over the life of the loan.
These figures are arithmetic, not advice. Which term suits you depends on circumstances this page knows nothing about — talk to a qualified adviser before committing.
Frequently asked questions
How is the monthly payment calculated?
With the standard amortisation formula: M = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1), where P is the principal, r is the monthly interest rate (annual rate divided by twelve) and n is the number of monthly payments. It produces a fixed payment that clears both interest and principal exactly at the end of the term.
Why does so little of an early payment go to principal?
Interest is charged on the balance outstanding, and at the start the balance is the whole loan. On a 30-year mortgage at 6 percent, roughly three quarters of the first payment is interest. The split reverses gradually, which is why the loan feels like it is barely moving for the first several years and then accelerates.
How much does an extra payment actually save?
More than most people expect, because every extra pound goes entirely to principal and removes all future interest that would have accrued on it. Extra payments early in the term are worth far more than the same amount later — the money has more remaining interest to cancel.
Does this include taxes, insurance or fees?
No. This calculates principal and interest only. A real mortgage payment usually also carries property tax, insurance and sometimes mortgage insurance, which together can add 20 to 30 percent to the monthly figure. Arrangement fees and points are separate again, and are why the APR on an offer is higher than the headline rate.
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