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Monthly Interest Formula:
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The monthly mortgage interest payment represents the portion of your mortgage payment that goes toward interest charges. It's calculated based on your outstanding principal balance and the monthly interest rate.
The calculator uses the simple interest formula:
Where:
Explanation: This formula calculates only the interest portion of your mortgage payment, not including principal reduction, taxes, or insurance.
Details: Understanding your monthly interest payment helps you see how much of your payment is actually reducing your principal versus going toward interest costs. This is crucial for financial planning and considering mortgage refinancing options.
Tips: Enter your current outstanding mortgage balance and your monthly interest rate (annual rate divided by 12). Both values must be positive numbers.
Q1: How do I convert annual interest rate to monthly?
A: Divide your annual interest rate by 12. For example, 6% annual rate becomes 0.06/12 = 0.005 monthly rate.
Q2: Why does my interest payment change over time?
A: As you pay down your principal, the interest portion decreases each month (in an amortizing loan), even if your total payment stays the same.
Q3: Does this calculation work for all mortgage types?
A: This simple formula works for fixed-rate mortgages. Adjustable-rate mortgages may have different calculations as rates change.
Q4: What's not included in this calculation?
A: This calculates only the interest portion. A full mortgage payment also includes principal, property taxes, homeowners insurance, and possibly PMI.
Q5: How can I reduce my interest payments?
A: Making extra principal payments, refinancing to a lower rate, or choosing a shorter loan term can reduce total interest paid over the life of the loan.