How to Figure Out Mortgage Plus Interest

Find out how much interest your mortgage will cost you.

When you get a mortgage, your payments will include not only the amount borrowed, but also interest payments on the amount. These interest payments make up a significant portion of your monthly payment, especially during the first few years of repayment. For example, a 30-year mortgage of $200,000 at 5 percent annual interest has monthly payments of $1073.64, but $833.33 of this goes toward interest the first month and only $240.41 actually pays off the money borrowed. The buyer will pay a total of $186,511.57 in interest while paying back the $200,000 mortgage.

Instructions

Calculate with Online Mortgage Calculator

1. Navigate to a website with an online mortgage calculator (see Resources).

2. Type the information about your mortgage into the calculator. This includes the amount borrowed, the length of the repayment term and the interest rate.

3. Click on "Calculate" to find your monthly payment.

4. Click on "Show/Recalculate Amortization Table" to see the full list of payments you will make on the mortgage. Each payment is broken down into principal and interest. Principal repays the money borrowed, while interest goes to the lender.

5. Scroll to the bottom of the table to find the total interest you will pay over the repayment term for the mortgage.

Calculate by Hand

1. Multiply the number of years in your repayment term by 12 to find the total number of monthly payments. For a 30-year mortgage, 30 times 12 is 360 monthly payments.

2. Divide your annual interest rate by 12 to find your monthly interest rate. Move the decimal point two spaces to the left to express it as a decimal instead of a percent. For example, 5 percent divided by 12 is .4167 percent, which is .004167 as a decimal.

3. Add 1 to the decimal interest rate and then raise this answer to the power of the number of monthly payments. In this case, you would calculate 1.004167^360 and get an answer of 4.4683.

4. Multiply this number by your decimal monthly interest rate and then divide this by the number minus 1. For example, multiply 4.4683 by .004167 and divide this by 4.4683 minus 1 to get .005368.

5. Multiply this decimal by the amount of your mortgage to estimate your monthly payment. In this case, .005368 times $200,000 equals $1073.60. This estimate is 4 cents smaller than the actual monthly payment because of rounding.

6. Multiply the monthly payment by the number of months in the payment period to find the total amount paid on the mortgage. In this case, $1073.60 times 360 is $386,496.

7. Subtract the mortgage amount to find how much of the payments will go toward interest. For example, $386,496 in total payments minus $200,000 for principal leaves $186,496 in interest. Because of rounding in the calculations, this amount is $15.57 less than the actual amount of $186,511.57 found through an online calculator.

Tips & Warnings

• Many online mortgage calculators allow you to see the impact of making extra payments on your mortgage. Extra payments go directly toward paying down principal and reduce both the amount of time it will take to pay off the mortgage and the total interest you will pay.

References

• Bankrate: Loan Calculator and Amortization
• Foner Books: How to Calculate Mortgage Payments

Resources

• Bankrate: Loan Calculator and Amortization