Skip to Content

Mortgage Calculator

Mortgage calculators enable us to measure how changes in mortgage terms will impact our future financial outlook. They form an essential tool during the mortgage process, helping homebuyers identify the best terms for their mortgage. Let's get familiar with them.

Key factors in mortgage calculations include:

  • Mortgage Principal
  • Loan Balance
  • Compound Interest Rate
  • Number of Payments per Year
  • Total Number of Payments; and
  • Regular payment amount

Further advanced mortgage calculators incorporate other costs associated with a mortgage, including insurance and such as local/state taxes.

Fixed Rate Mortgage Calculators

Monthly payments for a fixed rate mortgage are the amount paid by the borrower every month that ensures that the loan is paid off in full with interest at the end of its term. With a fixed rate mortgage, the borrower agrees to pay off the loan completely at the end of the loan's term, so the amount owed at month N must be zero.

The fraction of the monthly payment that is applied to principal pay down equals the amount of payment minus the amount of interest currently paid on the pre-existing unpaid principal.

The interest component of the monthly payment, is the interest rate times the amount unpaid at the end of month. Since in the early years of the mortgage the unpaid principal is still large, so are the interest payments on it.

The portion of the monthly payment going toward paying down the principal is very small and equity in the property accumulates very slowly (in the absence of changes in the market value of the property). But in the later years of the mortgage, when the principal has already been substantially paid down and not much monthly interest needs to be paid, most of the monthly payment goes toward repayment of the principal, and the remaining principal declines rapidly.

The borrower's equity in the property equals the current market value of the property minus the amount owed.

Early on, the portion of the monthly payment going toward paying down the principal is very small and equity in the property accumulates slowly. Click To Tweet

Adjustable Rate Mortgage Calculators

Annual percentage rates (APR) calculations for Adjustable Rate Mortgages (ARMs) require many more variables, including: the starting interest rate; the length of time at that rate; the recast; the payment change; the index; the margins; the periodic interest change cap; the payment cap; lifetime cap; the negative amortization cap; and others.¹

In the forthcoming Stem Lending blog posts, we will dive deeper into these steps and the gotchas that you need to watch out for. Please feel free to reach out to [email protected] or instantly apply if you have any questions.

Have a happy home buying experience! – Stem Lending Team

APR Disclosure:

NMLS#1648699 STEM Lending, Inc. Ph: 833-600-0490. ( The Principal, Interest and MI Payment on a $300,000 30-Year Fixed-Rate Loan At 3.5% is $1,374.08. The Annual Percentage Rate (APR) is 3.663% with Estimated Finance Charges of $6,000. The Principal and Interest Payment does not include taxes and home insurance premiums, which will result in a higher actual monthly payment. The APR is calculated using the Actuarial Method.

Skip to content