Mortgage Calculator

Reference

How do mortgage payments work?

A mortgage is a loan secured against real estate, typically repaid over 15–30 years. Each monthly payment covers two parts: principal (reducing the loan balance) and interest (the cost of borrowing). The split between these two parts shifts over time — in early years, most of your payment goes to interest; in later years, most goes to principal. This is called amortization.

Mortgage payment formulas

Annuity (fixed payment): M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P = principal (loan amount), r = monthly interest rate (annual rate / 12 / 100), n = total number of monthly payments. This gives a constant monthly payment for the life of the loan.
Differentiated (decreasing payment): Monthly principal = P / n; Monthly interest = Remaining balance × r. Since the balance decreases each month, total payment also decreases over time.

Annuity vs differentiated payments

Annuity (equal payments) — your payment stays the same every month, making budgeting simple and predictable. This is the standard in the US, UK, Western Europe, and most countries. You pay more total interest compared to differentiated, but the fixed payment is easier to manage. Differentiated (decreasing payments) — early payments are higher but decrease over time. You pay less total interest over the loan's life because the principal is paid down faster. Common in Russia, Eastern Europe, and some Asian markets. Best if you can afford the higher early payments.

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