How to Calculate the Total Mortgage Interest Paid on a Loan
Calculating the total mortgage interest that you will paying over the course of a home loan can help give you a high level perspective on your purchase. Most new and future homeowners don't even realize the amount of money they will be paying for a new home over the course of 15, 20, or even 30 years. The majority of those payments will be made towards the interest on the home instead of the principal. That is why it is so important to understand how the total mortgage interest can be calculated and analyzed. Here are the steps to determine your mortgage interest.
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Instructions
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Calculate your projected monthly payment as the first step in determining your total mortgage interest over the course of the home loan. If you already have a mortgage, then look at your most recent statement to find the number. Be sure to exclude any additional monthly fees such as escrow payments, home insurance payments, and home owner's association payments in your figures.
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Run a calculation to figure out the total amount owed over the course of the loan. To make this calculation, take the monthly mortgage and interest payment (from step #1) and multiply it by the number of months in your loan. A 30 year mortgage for example equates to 360 mortgage interest and principal payments (30 * 12).
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Identify the original loan amount for either a new or existing mortgage. This value represents the total amount of capital you are borrowing from the bank to finance your home. Be sure to exclude any down payments in this figure as you are not borrowing against that money.
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Take the total amount paid on the loan from step #2 and subtract it from the total funded loan amount in step #3. If you took out a $200,000 loan for example and the total calculated payment amount was equal to $450,000 - then the total mortgage interest paid over the course of the loan would be $250,000 (or $450,000 - $200,000). This calculation was simplified for ease of communication.
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Tips & Warnings
Use one of the many online mortgage calculator's to determine a projected monthly interest and principal payment for a loan.
Use this data to make sound educated decisions on whether to purchase a new home, refinance, etc.
