Home
Back
Interest Payment Formula:
| From: | To: |
The mortgage interest payment is the portion of your monthly mortgage payment that goes toward paying interest on the outstanding principal balance. It represents the cost of borrowing money from the lender.
The calculator uses the simple interest formula:
Where:
Explanation: This formula calculates the interest portion of your mortgage payment based on the current outstanding balance and the monthly interest rate.
Details: Understanding your interest payment helps you track how much of your payment is reducing your principal vs. paying interest costs. This is crucial for financial planning and evaluating mortgage refinancing options.
Tips: Enter the current outstanding principal balance in dollars and the monthly interest rate as a decimal (e.g., 0.00417 for 5% annual rate divided by 12). Both values must be positive numbers.
Q1: How do I convert annual interest rate to monthly?
A: Divide the annual interest rate by 12. For example, 6% annual rate = 0.06/12 = 0.005 monthly rate.
Q2: Why does my interest payment decrease over time?
A: As you pay down your principal balance, the amount of interest you pay each month decreases because it's calculated on a smaller outstanding balance.
Q3: Is this calculation for fixed or adjustable rate mortgages?
A: This calculation works for both, but for adjustable rate mortgages, the interest rate (R) will change when the rate adjusts.
Q4: Does this include property taxes and insurance?
A: No, this calculation only shows the interest portion. Your total mortgage payment may include principal, interest, taxes, and insurance (PITI).
Q5: How accurate is this simple interest calculation?
A: This provides the exact interest portion for that specific month based on the current outstanding balance and interest rate.