How is a monthly mortgage payment calculated?

M = P × [r(1 + r)^n] ÷ [(1 + r)^n − 1], where P is the loan amount, r the monthly rate (annual rate ÷ 12) and n the number of payments. A $280,000 loan at 6.5% over 30 years costs about $1,770 a month.

How much interest do you pay over a 30-year mortgage?

Often more than the loan itself: $1,769.88 × 360 payments is about $637,000, so a $280,000 loan costs roughly $357,000 in interest.

Is a 15-year mortgage cheaper than a 30-year one?

Per month it costs more, but in total far less. On $300,000 at 6.5%, the 15-year loan pays roughly half the total interest of the 30-year one, because the balance falls much faster.

How to Calculate Mortgage Payments

Understanding Mortgage Payments

A mortgage is a loan used to purchase real estate, typically repaid over 15 to 30 years. Each monthly payment consists of two parts: principal (reducing the loan balance) and interest (the cost of borrowing). Early in the loan, most of your payment goes to interest. Over time, a larger share goes toward principal. Understanding how mortgage payments are calculated helps you make informed decisions about home buying.

The Monthly Payment Formula

M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ - 1]

Where:
M = Monthly payment
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (years × 12)

Step-by-Step Example: 30-Year Mortgage

Home price: $350,000, Down payment: $70,000 (20%), Loan amount: $280,000, Interest rate: 6.5%:

Monthly rate: r = 6.5% ÷ 12 = 0.065 ÷ 12 = 0.005417
Number of payments: n = 30 × 12 = 360
Numerator: 0.005417 × (1.005417)³⁶⁰ = 0.005417 × 6.9916 = 0.03788
Denominator: (1.005417)³⁶⁰ - 1 = 6.9916 - 1 = 5.9916
Monthly payment: $280,000 × (0.03788 ÷ 5.9916) = $280,000 × 0.006321 = $1,769.88

Total Cost of Your Mortgage

Your monthly payment of $1,769.88 over 360 months means you pay:

Total Paid = Monthly Payment × Number of Payments
$1,769.88 × 360 = $637,156.80

Total Interest = Total Paid - Loan Amount
$637,156.80 - $280,000 = $357,156.80

On a $280,000 loan at 6.5% for 30 years, you pay more in interest ($357,157) than the original loan amount! This is why even small rate differences matter enormously.

How Interest Rates Affect Payments

Here is how the monthly payment and total interest change for a $300,000 loan over 30 years:

Interest Rate	Monthly Payment	Total Interest	Total Paid
4.0%	$1,432	$215,609	$515,609
5.0%	$1,610	$279,767	$579,767
6.0%	$1,799	$347,515	$647,515
6.5%	$1,896	$382,633	$682,633
7.0%	$1,996	$418,527	$718,527
8.0%	$2,201	$492,480	$792,480

30-Year vs 15-Year Mortgage

Comparing a $300,000 loan at 6.5%:

Feature	30-Year	15-Year
Monthly Payment	$1,896	$2,613
Total Interest	$382,633	$170,388
Total Paid	$682,633	$470,388
Interest Savings	—	$212,245

A 15-year mortgage has higher monthly payments but saves you over $212,000 in interest compared to a 30-year loan at the same rate.

Understanding Amortization

Amortization shows how each payment is split between principal and interest. Here is a snapshot for the first and later years of a $280,000 loan at 6.5%:

Payment	To Interest	To Principal	Remaining Balance
Month 1	$1,517	$253	$279,747
Month 60 (Year 5)	$1,436	$334	$263,401
Month 180 (Year 15)	$1,149	$621	$211,471
Month 300 (Year 25)	$600	$1,170	$109,291
Month 360 (Year 30)	$10	$1,760	$0

Tips for Homebuyers

Shop for the best rate: Even 0.25% less can save tens of thousands over the loan's life.
Make extra payments: Paying just $100 extra per month can shave years off your mortgage.
Consider the 28/36 rule: Housing costs should not exceed 28% of your gross income, and total debt should stay below 36%.
Factor in all costs: Property tax, insurance, PMI, and maintenance add significantly to your monthly housing expense.
Save for a larger down payment: Putting 20% down avoids PMI (Private Mortgage Insurance) and reduces your loan amount.