Calculate your monthly mortgage payment including taxes and insurance.
Mortgage Guide
Types of mortgages
There are various types of mortgages available. Fixed-rate mortgages have an interest rate that remains constant throughout the loan term, protecting borrowers from increased payments if interest rates rise. Variable-rate mortgages have rates tied to market interest rates, which can result in lower or higher payments depending on market conditions. Hybrid mortgages combine both approaches with an initial fixed rate followed by variable rate.
Down payment
Down payment is the amount buyers pay from their own savings when purchasing a property. Banks typically require a minimum of 20% of the property value, though some offer programs with lower down payments (5-10%) with additional insurance. A higher down payment means a smaller loan amount, lower risk for the bank, and often better interest rates. Additional costs to consider include notary fees, commissions, and insurance.
Fixed vs variable rate
Choosing between fixed and variable rates depends on individual risk tolerance and interest rate forecasts. Fixed rates provide certainty and budget planning, but are usually higher than initial variable rates. Variable rates can be beneficial during periods of low interest rates but carry the risk of increased payments. Many experts recommend considering a partial fixed rate for the first few years of the loan.
Loan amortization
Amortization is the process of paying off a loan over time. Initially, most of the payment goes to interest and less to principal. Over time, this proportion reverses. Longer loan terms (e.g., 30 years) mean lower monthly payments but higher total interest costs. Shorter terms (15-20 years) have higher payments but lower total cost. Consider making extra payments during favorable financial periods to shorten the repayment term.
A 15-year term costs 47% more a month and saves 55% of the interest
Mortgages are chosen on the monthly payment, which is the number that determines whether you can proceed at all. It is also the number that hides the total. On 300,000 at 5%, shortening the term from thirty years to fifteen raises the payment by 762 and removes 152,739 of interest.
How it works
- Calculates the monthly payment from principal, rate and term using the annuity formula.
- Totals the interest paid across the life of the loan, which the payment alone conceals.
- Shows the split between interest and principal over time, which is heavily weighted toward interest early on.
payment = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1) where r is the monthly rate and n the number of months total interest = payment × n − P
Worked example
300,000 borrowed at 5%, compared over thirty years and fifteen.
- 30 years: payment 1,610.46, total 579,767, interest 279,767
- 15 years: payment 2,372.38, total 427,029, interest 127,029
- the shorter term costs 761.92 more each month, a 47% increase
- and removes 152,739 of interest, a 55% reduction
Paying 47% more each month cuts the interest bill by 55%. Over the full thirty years you would pay almost the property's price again in interest alone — 279,767 on a 300,000 loan.
Reading the result
- Early payments are almost entirely interest. In month one, 1,250 of the 1,610 payment is interest and only 360 reduces the debt. By month 180 the split is roughly even, and by month 359 it is 1% interest — which is why the balance falls so slowly at first.
- That front-loading is what makes early overpayment so effective. A lump sum in year two removes interest for the remaining twenty-eight years; the same sum in year twenty-five removes very little, because there is little interest left to remove.
- Compare on total cost, not payment, and check for early repayment charges before committing to overpay. Some fixed-rate products penalise overpayment above a threshold, which changes the arithmetic entirely.
- A longer term is not automatically wrong. Lower payments free cash for a pension, an emergency fund, or simply for staying solvent — and those can be worth more than the interest saved. The error is choosing the term without seeing what it costs.
Common questions
- Should I take the shortest term I can afford?
- It minimises interest, but leaves the least room. A useful middle path is a longer term with regular overpayments — you keep the ability to drop back to the lower payment if circumstances change, while capturing most of the interest saving.
- Why does my balance barely move in the first years?
- Because the interest is charged on the whole outstanding balance, which is nearly the full loan at the start. In month one only 360 of 1,610 reduces the debt. The proportion shifts steadily, but slowly at first.