1. What is the Mortgage Interest Calculation?

The mortgage interest calculation determines the monthly interest portion of a mortgage payment based on the outstanding principal balance and the monthly interest rate.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest amount
• \( P \) — Outstanding principal balance
• \( R \) — Monthly interest rate (annual rate ÷ 12)

Explanation: This calculation shows only the interest portion of your mortgage payment, not including any principal reduction.

3. Importance of Mortgage Interest Calculation

Details: Understanding how much of your payment goes toward interest helps in financial planning, comparing loan options, and making informed decisions about extra payments.

4. Using the Calculator

Tips: Enter the current outstanding principal balance and the monthly interest rate (annual rate divided by 12). Both values must be positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: How do I convert annual interest rate to monthly?
A: Divide the annual percentage rate by 12. For example, 6% annual rate = 0.06 ÷ 12 = 0.005 monthly rate.

Q2: Does this calculation include property taxes and insurance?
A: No, this calculates only the interest portion of your mortgage payment. A full mortgage payment typically includes principal, interest, taxes, and insurance (PITI).

Q3: Why does the interest amount change over time?
A: As you pay down the principal, the interest portion decreases while the principal portion increases (in an amortizing loan).

Q4: 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.

Q5: Is mortgage interest tax deductible?
A: In many countries, mortgage interest on primary residences is tax deductible, but limits and rules vary by jurisdiction.