Mortgage Calculator

How mortgage payments work

A mortgage payment has two main components: principal (the money that goes toward paying down your loan balance) and interest (the money that goes to the lender as profit). In the early years of a 30-year mortgage, the vast majority of your payment goes toward interest — often over 60%. Over time, the balance shifts and more of each payment reduces the principal.

This front-loaded interest structure is why paying a mortgage for the full 30 years costs so much more than the home price. On a $400,000 home at 6.5% for 30 years, you'll pay roughly $490,000 in interest — more than the original loan. This is also why refinancing even 0.5% can save tens of thousands of dollars, and why making extra principal payments early has the biggest impact.

Why it matters to your money

Your mortgage is likely the largest debt you'll ever carry. Understanding how each payment splits between principal and interest helps you make informed decisions about down payment size, loan term, and whether to refinance. The total-interest cost over the life of the loan is often larger than the home's purchase price — which makes the interest rate one of the most important numbers in homeownership.

Read the full explainer on mortgage amortization for a visual breakdown of how your payments shift from interest to principal and strategies for paying off your mortgage faster.

Rules of thumb

• 15 vs. 30 years: A 15-year mortgage has higher monthly payments but saves tens of thousands in interest. Many people get the best of both worlds with a 30-year mortgage and extra principal payments.
• Down payment: Aim for at least 20% to avoid private mortgage insurance (PMI), which costs 0.5–1.5% of the loan amount per year. A smaller down payment might make sense if the monthly cash flow difference is small.
• Rate matters more than you think: A 1% difference in interest rate on a $400K loan is roughly $250/month — about $90,000 over 30 years. Shop around and consider paying points to buy down the rate.

15-year vs. 30-year mortgage: side by side

On a $400,000 loan at 6.5% interest, the difference in total cost between a 15-year and 30-year mortgage is staggering. The 30-year term keeps your monthly payment manageable, but you pay roughly twice the lifetime interest. The 15-year term demands a higher payment but cuts total interest nearly in half and builds equity far faster.

The 30-year borrower pays $957 less per month, but at the cost of $282,827 in extra interest over the life of the loan. The break-even analysis favors the 15-year term for nearly every homeowner who can absorb the higher payment.

Strategies to pay off your mortgage faster

You don't have to choose between a 15-year term's savings and a 30-year term's flexibility. Several strategies let you keep the lower 30-year payment as a safety net while attacking the principal aggressively when cash flow allows.

• Make bi-weekly payments. Instead of 12 monthly payments, split your payment in half and pay every two weeks. Because there are 52 weeks in a year, this results in 26 half-payments — the equivalent of 13 full monthly payments. That one extra payment per year shaves roughly 4–5 years off a 30-year mortgage and saves tens of thousands in interest.
• Round up or add a fixed extra principal amount. Adding even $200–$300 extra to principal each month has a disproportionately large effect early in the loan when the outstanding balance is highest. On a $400,000 loan at 6.5%, an extra $300/month cuts payoff time by roughly 7 years and saves over $100,000 in interest.
• Apply windfalls to principal. Tax refunds, bonuses, and inheritances applied directly to your mortgage principal reduce the balance dollar-for-dollar. Because these reduce future interest calculations immediately, a $5,000 lump sum applied in year two is worth more than $5,000 applied in year twenty.
• Refinance when rates drop meaningfully. A general rule is that refinancing makes sense when you can drop your rate by at least 0.75–1%, you plan to stay in the home long enough to recoup closing costs (typically 2–5% of the loan), and you don't extend the term significantly. Reset the term to your remaining years to avoid restarting the amortization clock.