Does this include taxes and insurance?

No. It calculates principal and interest only. A real mortgage payment usually also escrows property tax, homeowners insurance and sometimes mortgage insurance, which can add substantially.

Why does a longer term cost so much more?

Because interest accrues on the outstanding balance for longer. The payment falls, but you make many more of them and the balance falls more slowly early on, so total interest rises sharply.

Loan Payment Calculator

Estimate a monthly loan payment, total interest and total repaid from the amount, rate and term.

Draft — figures checked, awaiting an editorial read. Not indexed.

Monthly payment—

Total interest: —
Total repaid: —
Number of payments: —

Formula: M = P × i ÷ (1 − (1 + i)^−n), where i is the monthly rate and n the number of monthly payments.

This is a general estimate for planning only and is not financial advice. It excludes fees, taxes, insurance, and any rate that changes over the term. Confirm actual figures with the lender before making a decision.

What this calculates

This estimates the level monthly payment on an amortising loan — a car loan, personal loan, or the principal-and-interest portion of a mortgage — along with the total interest paid over the full term. The total interest figure is the one worth looking at, because the monthly payment alone hides the cost of a long term. Stretching a loan from three years to six roughly halves the payment and roughly doubles the interest, and the payment is the number most people compare when shopping.

How it works

This is the standard amortisation formula. The annual rate is divided by twelve to give a monthly rate, and the term in years is multiplied by twelve to give the number of payments. The payment is then the principal times the monthly rate, divided by one minus (one plus the monthly rate) raised to the negative number of payments. That expression works out the constant payment that exactly clears the balance over the term, with the interest portion large at the start and shrinking as the principal falls.

Worked example

A $25,000 loan at 6.5% over five years. The monthly rate is 0.065 ÷ 12 = 0.0054167 and there are 60 payments. The payment is 25000 × 0.0054167 ÷ (1 − 1.0054167⁻⁶⁰) = $489.15. Over 60 payments that is $29,349 repaid, so $4,349 of interest. Stretch the same loan to seven years and the payment falls to $371.24 — but the total interest rises to $6,183.82, an extra $1,835 for the smaller monthly figure.

Common mistakes

Confusing the nominal rate with the APR. The APR is meant to include fees and so is usually slightly higher than the interest rate this formula uses; comparing a quoted APR against a rate-only calculation understates the true cost. Second, forgetting that a mortgage payment is not just principal and interest — taxes, insurance and any mortgage insurance are typically escrowed on top. Third, judging affordability from the monthly payment alone rather than the total repaid.

Common questions

Does this include taxes and insurance?: No. It calculates principal and interest only. A real mortgage payment usually also escrows property tax, homeowners insurance and sometimes mortgage insurance, which can add substantially.
Why does a longer term cost so much more?: Because interest accrues on the outstanding balance for longer. The payment falls, but you make many more of them and the balance falls more slowly early on, so total interest rises sharply.