Principal and interest, nothing else
This is the stripped-down version: three inputs, one output, no escrow and no fees. It is the right tool when you want the lender-facing number quickly and will handle the rest separately.
Because it excludes everything optional, it is also the cleanest basis for comparing two rate quotes on the same property.
The formula behind the number
An amortising loan is repaid in equal instalments. Each one covers the interest that accrued since the last payment, and whatever is left reduces the balance. The instalment that brings the balance to exactly zero on the final payment is:
Here P is the amount borrowed, i is the monthly rate (the annual rate divided by 12) and n is the number of payments. Nothing else enters the calculation, which is why two lenders quoting the same three inputs must arrive at the same instalment.
Worked example: $300,000 at 6.5% over 30 years
The calculator opens on this scenario, so you can follow every step:
- Amount borrowed: $300,000
- Annual rate: 6.5%, so the monthly rate is 6.5 ÷ 12 = 0.5417%
- Term: 30 years, so n = 30 × 12 = 360 payments
Paying $1,896.20 every month for 360 months comes to $682,633. Subtract the $300,000 you actually borrowed and the cost of the credit is $382,633, or 128% of the sum borrowed.
Where each payment goes
The instalment never changes, but its composition does. The first payment carries $1,625.00 of interest and only $271.20 of principal. By payment 180 the split has moved to $1,182.95 interest against $713.25 principal.
| Payment | Instalment | Interest | Principal | Balance |
|---|---|---|---|---|
| 1 | $1,896.20 | $1,625.00 | $271.20 | $299,729 |
| 2 | $1,896.20 | $1,623.53 | $272.67 | $299,456 |
| 3 | $1,896.20 | $1,622.05 | $274.15 | $299,182 |
| 180 | $1,896.20 | $1,182.95 | $713.25 | $217,677 |
| 360 | $1,896.20 | $10.22 | $1,885.99 | $0.00 |
The pattern is identical for every fixed-rate mortgage regardless of size. Only the scale changes.
What moves the answer most
Two levers change the total, and they do not pull with equal force.
Add one percentage point to the rate and the instalment goes from $1,896.20 to $2,097.64, which is $72,518 more over the full term. Cut 5 years off the term instead and the instalment rises to $2,025.62, but total interest falls from $382,633 to $307,686. Since this figure excludes escrow, a rate improvement shows up here undiluted, which makes it the better view when negotiating.
What this calculator leaves out
Everything except principal and interest. Treat the result as a floor for your housing cost, never as the total.
Using this figure as a filter
Because the output excludes escrow and fees, it is a floor rather than a budget. Most buyers use it in one of two ways.
The first is as a rate check: run two quotes on the same amount and term, and the difference in the monthly figure is the difference between the lenders with nothing else clouding it. The second is as a rough affordability screen. Add roughly 25 percent to the figure below for tax, insurance and any association fee, and compare that against the 28 percent of gross income that underwriters commonly allow for housing. If it fails that screen here, it will fail with the lender too.
Related calculators
- Full mortgage calculator — adds the costs this one omits
- Mortgage comparison — two rate quotes side by side
- PITI calculator — principal, interest, tax and insurance together