Loan calculator
Monthly payment, total interest, and what happens when you pay a little extra.
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The single most effective lever a borrower has. Try a figure you would not miss.
Of the first $1,688, $1,354 is interest and only $334 reduces the debt — 80% of it is rent on the money. That share falls every month, slowly at first.
Total interest is 103% of what you borrowed. Add an extra monthly payment above to see what it does to that figure.
What this tool does
It gives you the monthly payment on an amortising loan, the total interest over the term, and two things most calculators leave out: what your first payment actually consists of, and what a small regular overpayment does to the whole picture.
The two numbers borrowers underestimate
How front-loaded the interest is. Interest is charged on what you still owe, so at the beginning nearly all of the payment is interest and almost none of it reduces the debt. Borrowers routinely discover in year three that the balance has barely moved. The bar on the right shows that split for your figures.
What an overpayment is worth. Because interest compounds over the remaining term, money paid early removes far more than its own value in future interest. A modest extra payment on a long mortgage often takes years off the term and saves a multiple of what was actually paid in.
The reason this is the best risk-free return available to most people: paying down a 6% loan is mathematically identical to earning 6% after tax, guaranteed, with no market risk. Very little else offers that.
Before you overpay, check one thing
Most mortgages allow overpayments up to a limit — commonly 10% of the balance a year — and charge a penalty above it. Check your agreement, and check whether the lender applies overpayments to the balance immediately or holds them until the anniversary. The difference between those two treatments is worth real money over a long term.
Questions
Why is almost all of my early payment interest?
Because interest is charged on the balance outstanding, and at the start the balance is the whole loan. On a 25-year mortgage at 6.5%, roughly four fifths of the first payment is interest. The share falls as the balance drops, but slowly — which is why the first years feel like paying a lot and owing almost the same.
Is overpaying really worth it?
It is the highest guaranteed return available to most households. Every unit you overpay removes that unit from the balance, so it saves you every future interest charge on it — compounded for the remaining term. No savings account or investment offers a risk-free return equal to your mortgage rate.
What is the formula?
Payment equals principal times the monthly rate, divided by one minus one plus the monthly rate to the power of minus the number of months. The monthly rate is the annual rate divided by twelve. That is the standard amortising formula banks use.
Does this match my bank's figure exactly?
It will be close, usually within a currency unit or two. Banks differ in day-count conventions, when they apply the first charge, and whether fees are added to the balance. Use this to compare offers and to plan; use the bank's own illustration for the contract.
What about fees and insurance?
Not included. Arrangement fees, valuation, insurance and any early repayment charge sit outside the payment calculation. On mortgages the early repayment charge matters most: many lenders allow overpayments up to about 10% of the balance a year and penalise the excess.