How to Calculate Mortgage Interest for a Year
Most mortgages are fixed-rate, meaning the interest rate does not change over the life of the loan. Most variable-rate mortgages will remain fixed for 12 month increments, so the method for calculating the interest for a single year is exactly the same as for a fixed-rate mortgage. You will need to know the monthly payment for your mortgage and the annual percentage rate (APR) for the year you are calculating. Unless you calculating the interest for the first year, you will also need to know the unpaid balance for your mortgage at the time you start your calculation.
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Instructions
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1
Calculate the monthly interest rate by dividing the APR by 12. If your APR was 6 percent, then 0.06/12 = 0.005. Your monthly interest rate is 0.005, or 0.5 percent.
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2
Multiply the monthly interest rate by the current unpaid balance of the mortgage. This will be the full loan value you are calculating the first year. This is the interest payment for the first month. If your loan value is $200,000, then 200000*0.005 = 1000. Your first months interest is $1000.
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3
Subtract the interest payment from the monthly payment amount. This is the principal payment for the first month. The monthly payment for as 30-year mortgage for $200,000 at 6 percent APR is approximately $1900. Therefore, the first month's principal payment will be $1900 - $1000 = $900.
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4
Subtract the principal payment from the initial unpaid balance. This is the unpaid balance for the second month. Since the initial loan balance is $200,000, the new unpaid balance is $200,000 - $900 = $199,100.
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5
Repeat the process starting with the new unpaid balance. Continue until you have a total of 12 iterations.
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6
Add the 12 values for monthly interest. This is the total interest for one year.
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Tips & Warnings
If your mortgage requires bimonthly or biweekly payments, you can still use this process. Simply replace "12" with "24" in all steps for bimonthly payments or with "26" for bi weekly payments.
