This section will take you through a step by step explanation of how a mortgage calculator works and how to interpret the results. This approach is intended to start with a basic mortgage calculator, and then build up to more complex calculators. If you have any comments on how to improve this experience please write us at There are 30 year, 25 year, 20 year, 15 year, 10 year amortization schedules available with our mortgage loan calculators.

Step 1: Basic
Your Standard Mortgage Calculator

Your standard mortgage calculator usually calculates your monthly payment based on your anticipated mortgage's 1) balance, 2) term, and 3) fixed rate. Some (like the one we are about to try) will display an amortization schedule of the loan as well, seperating the annual principal and interest. Now click here for STANDARD MORTGAGE CALCULATOR and enter the required information to obtain the results.

If you wanted to calculate what is displayed using a pen and paper you could attempt it, but it would probably take you half the day. There are some financial calculators that you can buy which will aid you like the HP 12C. If you decide to attempt this by hand, just to see how the calculations are done, try the first 12 months. Note that most standard mortgages use a 30/360 day basis in determining interest amounts.

Step 2: Beginners
Compare Two Mortgages (Type 1)

Let us first compare two amortizing loans with all the same terms except the interest rate. Now click here for COMPARE TWO MORTGAGES (Type 1). The default balances for the both the new loan and old loan are $100,000. The default "Mortgage Terms" for both loans is 30 years. The default rate for the new loan is 4.125% and the default rate for the old is 5.125%. Generating the results will show 1) a difference in the rates of 1.00%, 2) a difference in the monthly payment of $59.84, 3) a difference in total interest payments over the life of the two loans of $21,541, and 4) a difference in total payments (principal & interest) over the life of the two loans of $21,541. The schedule at the bottom will display the details relating to the differences in the annual payments.

This is a great little analysis. It is 1) clean, 2) straight forward, and 3) easy to interpret.

However there are some limitations to this type of simple mortgage calculator; i.e. 1) no ability to adjust for an early pay off of the loan, 2) no ability to adjust for a loan which may have already begun amortizing, and 3) no ability to adjust for the effects of present value and the time value of money.

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