Mortgage interest is the cost of borrowing money from a lender to purchase a home or other property. It's the fee paid to the financial institution for the privilege of using their capital, expressed as a percentage of the remaining loan amount (the principal).
The length of the loan term significantly impacts the total interest paid. Here is an example comparison for a **$250,000 Loan at 4%**.
| Loan Term | Monthly Payment (approx.) | Total Interest Paid (approx.) |
|---|---|---|
| 15 Years | $1,849 | $82,820 |
| 30 Years | $1,194 | $179,837 |
A shorter term means higher monthly payments, but you pay **much less total interest** as the debt is repaid faster.
Interest is always calculated on the outstanding principal balance. For a $240,000 loan at a 6% annual rate (0.5% monthly rate):
Monthly Interest Owed (First Payment) = Principal Balance x Monthly Interest Rate
$240,000 x 0.005 = $1,200
If the total payment is $1,438.92, then $1,200.00 goes to interest and only $238.92 goes to reducing the principal.
With this interest calculator, you can find out just how much a new house would to cost you each month. You may find that purchasing a house or condo may be cheaper than renting! Enter values in the fields below to find out how much each monthly payment would be with the given number of payments, interest rate, and principal amount of the loan.
| Date | Payment | Principal | Interest | Balance |
|---|