How Monthly Mortgage Payments Are Calculated

With equal payments the instalment never changes, but the split between interest and principal shifts over time. The tool applies the standard annuity formula to a loan amount, rate and term.

Open the tool：Mortgage Calculator (Equal Payments)

Why run the numbers before you buy

An agent quotes the purchase price, but the monthly payment decides whether the budget works. Borrowing 1,000,000 for 30 years at 4.9% costs about 5,307 a month, and total interest approaches 910,000, almost the principal again. Shorten the term to 20 years and the payment rises to about 6,544 while interest falls to roughly 570,000.

The same calculation helps when you weigh a larger down payment, a rate half a point higher, or a shorter term after a pay rise. Change one input at a time and watch which way the payment and the total interest move, so the trade-off stays visible instead of hiding in a spreadsheet.

Compare payments and total interest across 20, 25 and 30 years
See what a 0.5-point rate rise costs each month
Test how a larger down payment lowers the loan and payment

The equal-payment formula

Monthly rate = annual rate ÷ 12; periods = years × 12, rounded to whole months. Payment = P × r × (1 + r)^n ÷ ((1 + r)^n − 1). The loan is entered in units of 10,000, so 100 means 1,000,000 and 85.5 means 855,000. The tool rounds periods, so a 30-year loan is always 360 months.

Enter the rate as 4.9, not 0.049. When the rate is zero the formula collapses to principal ÷ periods, which the tool handles separately. Total repaid = payment × periods and total interest = total − principal; all three are rounded to two decimals, so hand-multiplying the displayed payment can differ by a few cents.

Loan in units of 10,000: 100 means one million
Rate as 4.9, not 0.049
Periods = years × 12, rounded

Why the bank quotes something else

Banks may accrue interest daily, start with a partial first month, reprice against a reference rate, charge an account fee, or require insurance. Those items can move the real payment by tens of units. Interest-only loans, graduated payments and equal-principal loans do not fit this formula.

Equal principal repays a fixed slice of principal each month, so the payment falls over time and total interest is lower, at the cost of a heavier start. This tool models equal payment only; do not compare the two outputs directly. For a binding figure, use the bank's amortisation schedule.

Equal principal and interest-only: not covered
Fees, insurance and appraisal: excluded
The bank's schedule is the binding number

FAQ

How different are equal payment and equal principal?

On 1,000,000 at 4.9% over 30 years, equal payment is about 5,307 a month with roughly 910,000 total interest. Equal principal starts near 6,861 and falls each month, with about 737,000 total interest. The first is predictable; the second is cheaper but front-loaded.

Why does payment × periods not match the total?

The payment is displayed rounded to two decimals, while the calculation keeps the unrounded value. Multiplying the displayed figure by 360 can differ from the tool's total by a few cents. That is rounding, not an error in the schedule.

What if I enter a zero rate?

The tool divides the principal by the number of months, which is the correct no-interest case, and does not divide by zero. Real products may have a grace period or a subsidised rate, so check the contract for the actual schedule.