1. What is Monthly Interest Calculation?

Monthly interest calculation determines the interest portion of your home loan payment for a given month. It's calculated by multiplying the outstanding principal balance by the monthly interest rate.

2. How Does the Calculator Work?

The calculator uses the simple interest formula:

Where:

• \( I \) — Monthly interest amount (currency)
• \( P \) — Outstanding principal balance (currency)
• \( R \) — Monthly interest rate (decimal)

Explanation: This formula calculates the interest portion of your mortgage payment based on the current loan balance and monthly interest rate.

3. Importance of Monthly Interest Calculation

Details: Understanding how much of your payment goes toward interest helps you track loan amortization, plan extra payments, and understand the true cost of borrowing over time.

4. Using the Calculator

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

5. Frequently Asked Questions (FAQ)

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

Q2: Why does the interest amount change each month?
A: As you pay down the principal, the interest is calculated on a smaller balance, so the interest portion decreases over time.

Q3: What's the difference between interest and principal payment?
A: Interest is the cost of borrowing, while principal payment reduces the actual loan balance.

Q4: How can I reduce my interest payments?
A: Make extra principal payments, refinance to a lower rate, or choose a shorter loan term.

Q5: Is this calculation accurate for all loan types?
A: This calculation works for simple interest loans. Compound interest loans may require different calculations.