Mortgage Calculator

Enter the property price, your deposit, the interest rate and the term. The calculator subtracts the deposit from the price to get the loan amount, then shows the monthly payment on a fixed-rate repayment mortgage along with the total interest and the total repaid over the full term. Read the monthly figure as the fixed amount owed every month for the whole term, and the total interest as what the loan costs on top of the sum borrowed. The defaults describe a fairly ordinary purchase: a 385,000 home with a 20% deposit, financed at 5.8% over 30 years.

Where the word comes from

Mortgage entered English in the late fourteenth century from Old French mort gage, literally "dead pledge." The name is legal rather than morbid, but the reason the pledge was called dead is older and narrower than the version most law books repeat. Medieval conveyancing knew two kinds of gage. Under a living gage the rents and profits the creditor drew from the pledged land came off the debt, so the land slowly repaid the loan by itself. Under a dead gage the creditor kept that income and the debt stood untouched: the pledge was barren, dead to the borrower. Glanvill's treatise on English law, compiled around 1187 to 1189, already discusses gages of land in those terms. The familiar explanation is a later gloss. Sir Edward Coke, in the first part of his Institutes in 1628, wrote that if the debtor pays the pledge is dead as to the creditor, and if he fails the land is taken from him for ever and so dead to him — a seventeenth-century rationalisation that has long outlived the arrangement it described. The related word amortize carries the same root, from Old French amortir, to deaden or kill: to amortize a loan is to kill it off gradually, deadening the balance with each payment until nothing is left.

From balloon loans to the amortizing mortgage

The loan this calculator models — level payments, a fixed rate, and a balance that reaches zero on the final payment — is younger than most people assume. In 1920s America a home loan from a commercial bank, a life insurance company or a mortgage company was written for no more than about half the property's value, ran three to five years, and was structured as a straight or only partly amortized balloon: the borrower paid interest, then owed the principal in a lump sum, and in practice renewed the loan one or more times before it was ever repaid. Building and loan associations were the exception. They had been writing long-term amortized mortgages since the late nineteenth century and led the market in low-deposit lending, mostly through the share accumulation plan, under which the borrower paid interest on a straight mortgage while subscribing to shares in the association until the share account matched the balance and the debt was cancelled. Under the Philadelphia Plan many buyers stacked the two, adding a second loan from a building and loan on top of a bank's interest-only first mortgage to borrow more than either lender would advance alone.

The Great Depression exposed the flaw. When credit froze, balloon loans could not be renewed, and borrowers who could still afford the interest lost their homes anyway because they could not repay the principal at once. More than half of the twelve thousand building and loans operating in 1929 had failed by 1941. The federal response rebuilt the market. The Home Owners' Loan Corporation, created in 1933, bought defaulted mortgages and rewrote them as long-term, fully amortizing direct-reduction loans; in three years it took applications from about 40% of all residential mortgagors and wrote new loans on roughly one in ten owner-occupied homes in the country. Title II of the National Housing Act of 1934 created the Federal Housing Administration, which insured lenders against loss on fully amortizing loans of up to twenty years at up to 80% of appraised value — longer, and with far less cash down, than the market had been offering. The thirty-year term came later still: Congress raised the FHA ceiling from twenty years to thirty in 1948, and the maximum loan-to-value ratio went from 80% to 95% on new construction in 1956. Homeownership climbed from 43.6% in 1940 to 61.9% in 1960.

How the payment is worked out

The monthly figure comes from the annuity-immediate formula of actuarial mathematics, the standard method for any fully amortizing fixed-rate loan:

M = L × i ÷ (1 − (1 + i)⁻ⁿ)

Here L is the loan (price minus deposit), i is the monthly rate (annual rate ÷ 12) and n is the number of payments (years × 12). If the rate is zero the formula collapses to a plain division, L ÷ n. The annuity mathematics behind it predates the modern mortgage by centuries: English treatments of compound interest and the present value of a stream of payments were already in print by the seventeenth century, among them Richard Witt's Arithmeticall Questions of 1613. The mortgage of the 1930s simply applied that long-settled valuation math to housing.

With the defaults: the loan is 385,000 − 77,000 = 308,000, the monthly rate is 5.8% ÷ 12 = 0.4833%, and n is 360. The formula gives a payment of 1,807.20. Across all 360 payments that is 650,591.77, of which 342,591.77 is interest. The first month makes the mechanics visible: interest alone is 308,000 × 5.8% ÷ 12 = 1,488.67, so only 318.53 of that first payment actually reduces the balance. The split shifts steadily toward principal as the balance falls, which is why paying a little extra in the early years removes far more interest than the same amount paid near the end.

Term length drives the total more than most buyers expect. Because interest accrues on the outstanding balance every month, a longer schedule keeps the balance high for longer and multiplies the cost, even though it lowers each payment. Shortening the default from thirty years to twenty-five lifts the payment to 1,946.96, about 140 more each month, and cuts total interest from 342,592 to 276,089 — some 66,500 saved for an extra 1,677 a year. Comparing the total-paid line across a few terms, rather than fixating on the monthly payment alone, is usually the clearest way to see what a mortgage actually costs.

What is deliberately left out

The result is principal and interest, nothing else. Real monthly housing costs also include property taxes, buildings or homeowners insurance, and in the US private mortgage insurance whenever the deposit is under 20% of the price. Canadian buyers below 20% pay for mortgage default insurance, Australians pay LMI. None of these appear here, and neither do one-off costs such as closing fees, stamp duty or arrangement fees. The calculator also assumes the rate stays fixed for the entire term, which is realistic in some markets and not in others.

Deposit and term conventions differ by market

The 77,000 default is 20% down, the level treated as the benchmark in most countries. Terminology and terms vary more than the math does.

Americans say down payment; British, Irish and Australian borrowers say deposit. UK borrowers should treat the result as valid only for the fixed period and rerun it at the expected follow-on rate. A Canadian term is not the amortization: a five-year term is a rate commitment, after which the balance is renewed at whatever rate is then on offer, while the balance itself is scheduled over twenty-five years or so. Canada's Interest Act also requires a blended-payment mortgage to state its rate calculated yearly or half-yearly rather than in advance, and lenders quote the half-yearly figure, so a posted 5.8% is slightly cheaper than shown here — about 13 a month lower on the default example.

These figures are estimates for comparing scenarios; an actual offer depends on fees, exact compounding and the lender's credit decision. See the site disclaimer.

Frequently asked questions

How much deposit do I need for a house?

The long-standing convention is 20% of the price — 77,000 on a 385,000 home — because that is where US lenders drop private mortgage insurance and where pricing in most markets stops improving. Plenty of buyers put down less: 5–10% deposits are routine for UK first-time buyers, and US FHA loans go as low as 3.5%. A smaller deposit means a larger loan, a higher payment and usually a higher rate.

How much does 1% on the rate change the monthly payment?

More than most people expect. On a 308,000 loan over 30 years, moving from 5.8% to 6.8% lifts the payment from 1,807 to 2,008 — about 11% more each month, and roughly 72,000 extra interest over the term. This is why borrowers compare offers in steps as small as 0.1%.

Why is the total interest more than the loan itself?

Because 30 years is a long time to rent money. The default example repays 650,592 on a 308,000 loan, and 342,592 of that is interest — more than the amount borrowed. Cutting the term to 25 years drops total interest to about 276,089, at the cost of a payment roughly 140 higher each month.

Does the monthly payment include property taxes and insurance?

No, the figure here is principal and interest only. In the US, escrowed property taxes and homeowners insurance commonly add 20–40% on top of the base payment, and putting down under 20% adds PMI of roughly 0.5–1.5% of the loan per year. UK and Australian borrowers pay council tax or rates separately rather than through the lender.