How a fixed mortgage payment works
With a standard fixed-rate amortizing mortgage, every payment is the same amount from the first month to the last. Early on, most of each payment goes toward interest on the outstanding balance, with a smaller portion paying down principal. Over time that ratio flips, and later payments are made up mostly of principal.
Formulas used
Monthly payment: P = L × i ÷ (1 − (1 + i)^−n)
Affordable loan amount (from income): L = (income × committed % ÷ 100) × (1 − (1 + i)^−n) ÷ i
New term with an extra payment: n' = −log(1 − L × i ÷ (P + extra)) ÷ log(1 + i)
Where L is the loan amount, i is the monthly interest rate (annual rate divided by 12 and by 100), n is the number of payments, and P is the original payment.
Practical example
A $400,000 home with an $80,000 down payment leaves a $320,000 loan. At a 7% annual rate over 30 years, the monthly payment comes out to roughly $2,129, totaling around $766,000 paid by the end — most of it interest, which is typical for long-term loans that compound monthly on the outstanding balance.
Why lenders cap the payment as a share of income
Most lenders won't approve a mortgage where the payment exceeds roughly 28 to 30 percent of a borrower's gross monthly income. This cap exists to limit default risk, since committing too large a share of income to a single long-term debt leaves little room for other expenses and unexpected costs.
The real impact of an extra monthly payment
Because each month's interest is charged on the balance at that moment, any extra amount applied reduces that balance immediately, so every following month accrues less interest. This compounding effect is why a relatively small extra payment, kept up consistently, can shorten a mortgage by several years and save a significant amount in total interest.
What this calculator doesn't account for
This simulation doesn't include property taxes, homeowners insurance, private mortgage insurance (PMI), HOA fees, closing costs, or the possibility of refinancing to a lower rate later. Treat the results as a planning estimate, and confirm exact terms directly with your lender.