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Total Interest Formula:
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The Total Mortgage Interest calculation determines the total amount of interest paid over the entire duration of a mortgage loan. It helps borrowers understand the true cost of borrowing beyond just the principal amount.
The calculator uses the formula:
Where:
Explanation: This formula calculates the difference between the total amount paid over the loan term and the original principal amount, which represents the total interest cost.
Details: Understanding total interest helps borrowers make informed decisions about loan terms, compare different mortgage offers, and plan their long-term financial strategy.
Tips: Enter your monthly EMI payment, the total number of payments (loan term in months), and the original principal amount. All values must be positive numbers.
Q1: Why is knowing total interest important?
A: It reveals the true cost of borrowing and helps you understand how much extra you're paying beyond the principal amount.
Q2: How can I reduce my total interest payment?
A: Making additional principal payments, choosing a shorter loan term, or securing a lower interest rate can significantly reduce total interest costs.
Q3: Does this calculation account for changing interest rates?
A: No, this calculation assumes a fixed EMI throughout the loan term. For adjustable-rate mortgages, the calculation would be more complex.
Q4: What's the difference between interest rate and total interest?
A: Interest rate is the percentage charged on the principal, while total interest is the actual dollar amount you'll pay over the entire loan term.
Q5: Can I use this for other types of loans?
A: Yes, this formula works for any installment loan with fixed monthly payments, including auto loans and personal loans.