Mortgage Payments: Amortization, Interest, and Costs

Reviewed July 20, 2026 · mortgage-payment@1.0.0

What a mortgage payment estimate measures

A mortgage payment estimate translates a loan amount, interest rate, and repayment term into a monthly principal-and-interest obligation. The DealYield baseline can also show recurring property costs, upfront financing fees, an optional interest-only opening period, lifetime interest, and scheduled balance snapshots.

The Mortgage Payment Calculator is a deterministic scenario tool. It does not quote a loan, calculate approval, or replace the payment schedule and disclosures from a lender.

The amortizing payment formula

For a fixed-rate amortizing loan, the calculator first converts the annual interest rate to a monthly rate:

Monthly rate = annual interest rate ÷ 12

It then calculates the level monthly principal-and-interest payment:

Payment = loan × monthly rate × (1 + monthly rate)^months ÷ ((1 + monthly rate)^months − 1)

The number of months is the entered loan term in years multiplied by 12. At a 0% rate, the calculation uses loan amount ÷ months so the result remains defined without dividing by zero.

Each amortizing payment covers the month’s interest first. The remainder reduces principal. Early payments therefore contain more interest, while later payments contain more principal, even though the scheduled principal-and-interest amount stays level.

Interest-only periods change the payment path

If an interest-only period is entered, the initial monthly payment is:

Interest-only payment = loan amount × monthly interest rate

The principal balance does not decline during those months. After the interest-only period, DealYield amortizes the original balance over the remaining months in the entered total term. That produces a second principal-and-interest payment, which is normally higher because the same principal must be repaid over less time.

For example, a 30-year loan with five interest-only years is followed by an amortizing payment calculated over the remaining 25 years. This is a simplified fixed-rate structure. It does not model a rate reset, payment cap, negative amortization, or lender-specific conversion rule.

Recurring property costs and upfront fees

The calculator keeps loan payment, property costs, and financing fees separate:

• Total monthly payment = principal and interest + monthly property taxes + monthly insurance + monthly HOA
• Points cost = loan amount × points rate
• Total financing fees = points cost + fixed fees

Property taxes, insurance, and HOA amounts are user-entered monthly assumptions. They are not inferred from the property or location, and the tool does not project future increases. The total monthly payment is therefore only as complete as those entries.

Points and fixed fees are shown upfront. They are not financed into the modeled loan balance, added to the monthly payment, or converted into an annual percentage rate. If a real loan finances fees or handles escrow differently, model and compare that treatment separately.

Worked example

The default example uses:

• Loan amount: $225,000
• Annual interest rate: 6.50%
• Loan term: 30 years
• Monthly property taxes: $300
• Monthly insurance: $150
• Monthly HOA: $0
• Points: 1.00%
• Fixed financing fees: $1,500
• Interest-only period: 0 months

Formula version mortgage-payment@1.0.0 produces a monthly principal-and-interest payment of $1,422.15. Adding $450 of entered property taxes and insurance produces an initial total monthly payment of $1,872.15.

One point costs $225,000 × 1.00% = $2,250. Adding $1,500 of fixed fees produces $3,750 in modeled upfront financing fees.

Across the modeled 360 monthly payments, total interest is $286,975.10. That figure excludes the upfront fees and recurring property costs. It assumes the scheduled payment path continues for the full term without prepayment, refinance, default, late charges, or a rate change.

Reading the balance schedule

The balance schedule starts with the original principal, then shows annual snapshots and any interest-only transition month. During a modeled interest-only phase, the balance stays level. During amortization, it declines as the principal portion of each payment is applied.

The schedule is useful for checking:

• How slowly principal falls early in a long amortization
• The balance at a planned hold or refinance date
• The effect of delaying amortization with an interest-only period
• Whether a quoted term would leave a balance that needs separate treatment

DealYield’s mortgage calculator fully amortizes the entered balance within the entered term. It does not separately model a balloon maturity shorter than the amortization schedule.

Testing rate sensitivity

The rate-sensitivity table reruns the same formula at the entered rate, plus and minus 0.50 and 1.00 percentage points. If an adjusted rate would be below 0%, the row is bounded at 0%.

Each row recalculates principal and interest, the total monthly payment, any later post-interest-only payment, and total interest. These rows are arithmetic scenarios, not rate forecasts or available loan offers.

A payment comparison should hold the other inputs constant. Changing the term, loan amount, points, or interest-only structure at the same time can obscure which assumption caused the difference.

What the estimate does not include

The baseline does not determine or model:

• Loan eligibility, credit, income, reserves, or collateral review
• Lender-specific APR, escrow, prepaid interest, or closing disclosures
• Adjustable-rate resets, step rates, payment caps, or negative amortization
• Extra principal payments, refinancing, delinquency, or prepayment charges
• Mortgage insurance unless entered as part of another monthly cost
• Changes in taxes, insurance, association costs, or servicing terms
• Income-tax effects, deductions, depreciation, or opportunity cost

Use the Maximum Loan Amount guide when the question is modeled loan capacity under LTV, Debt Yield, and DSCR constraints. Use the DSCR guide to connect debt service with property NOI, or the Rental Property ROI guide to place the payment inside a broader rental cash-flow scenario.

Reviewing a mortgage scenario

1. Confirm that the loan amount matches the principal actually financed.
2. Enter the note rate and repayment term from the same proposed structure.
3. Verify whether an interest-only period exists and what happens afterward.
4. Keep property taxes, insurance, HOA, points, and fixed fees visible.
5. Compare balance snapshots with the intended hold or refinance date.
6. Stress-test the rate while holding other assumptions constant.
7. Reconcile the result with the lender’s actual payment schedule and disclosures.

A calculated payment is an educational estimate, not a loan offer, approval, commitment, or lending recommendation.