Loan and mortgage calculator

How to use it

1. Enter the amount you are borrowing, the annual interest rate from the offer, and the term in years.
2. Read the monthly payment, the total interest and the payoff date; the chart shows the balance falling and where each year’s money went.
3. Add an amount to “Extra payment each month” — the page recomputes the loan twice, with and without it, and tells you the interest and the time you save.
4. Switch the schedule between yearly and monthly rows to check a specific payment.

Why the early years are almost all interest

A repayment loan uses one level payment for the whole term, but that payment is doing two different jobs and the split between them moves every month. Interest is charged on what you still owe, so at the start — when the balance is at its largest — nearly all of the payment is interest and only a sliver reaches the debt. As the balance falls the interest charge falls with it, and the same payment starts biting into the principal instead. The stacked bars make the handover visible: the violet block shrinks year by year while the grey one grows.

On a thirty-year mortgage at a typical rate, roughly the first decade goes mostly to the lender as interest, and the balance after ten years is still around four-fifths of what you borrowed. Nothing is wrong when that happens; it is what the arithmetic does. But it is the reason the total repaid can approach twice the sum borrowed, and the reason the timing of an overpayment matters so much.

An overpayment is worth most the day you make it

Money paid off the principal early stops accruing interest for every remaining month of the term, so the same amount is worth several times more in year two than in year twenty. This page computes the loan twice — the scheduled run and your run with the extra — and reports the difference, so the saving is a real subtraction rather than a rule of thumb. On a long mortgage a modest monthly overpayment routinely removes several years and a five-figure sum of interest.

Two practical cautions the arithmetic cannot see. Check whether your lender charges an early repayment fee, common on fixed deals and usually a percentage of the amount overpaid. And check that overpayments reduce the balance rather than being held as a credit against future payments — those are different things, and only the first saves interest.

What the payment here does not include

This figure is principal and interest only. A mortgage payment as your bank collects it may also carry property tax, buildings insurance, mortgage insurance where the deposit is small, and service or ground charges on a leasehold — together often a quarter again on top of the number shown here. A car loan may bundle GAP insurance or an arrangement fee into the balance rather than the payment.

The rate to type in is the interest rate, not the APR. APR folds arrangement fees into a single comparison figure, which is genuinely useful for comparing offers and wrong for computing a payment — using it here would inflate the monthly figure. And if the deal is fixed for two or five years rather than the whole term, treat everything past the fix as a scenario: the payment will be recomputed at whatever rate applies then.

Questions