Finance
How Mortgage Payments Are Calculated (EMI, Interest & Amortization)
Understand how your monthly mortgage payment is computed. Learn about principal, interest split, down payment impact, and how to save on total interest.
A mortgage is simply a large loan secured against property. The math behind your monthly payment is the same EMI formula used for any loan — but the numbers are bigger and the tenure is longer, which means interest plays a much larger role.
The formula
Loan Amount = Home Price × (1 − Down Payment %)
Monthly Payment = Loan × r × (1+r)ⁿ / ((1+r)ⁿ − 1)
r = Annual Rate / 12 / 100
n = Tenure in monthsDown payment impact
Higher down payment = smaller loan = lower monthly payment + less total interest.
| Home Price | Down Payment | Loan | Monthly (7%, 20yr) | Total Interest |
|---|---|---|---|---|
| $300,000 | 10% ($30K) | $270,000 | $2,093 | $232,280 |
| $300,000 | 20% ($60K) | $240,000 | $1,860 | $206,471 |
| $300,000 | 30% ($90K) | $210,000 | $1,628 | $180,662 |
A 20% down payment saves $25,809 in interest compared to 10%.
15-year vs 30-year
A shorter tenure means higher monthly payments but dramatically less total interest:
| Tenure | Monthly Payment | Total Interest | Total Paid |
|---|---|---|---|
| 15 years | $2,158 | $148,417 | $388,417 |
| 20 years | $1,860 | $206,471 | $446,471 |
| 30 years | $1,596 | $334,484 | $574,484 |
Going from 30 to 15 years saves $186,067 in interest!
What else is included
Your actual monthly housing cost often includes:
- Principal & Interest (the mortgage itself)
- Property Tax (annual tax / 12)
- Insurance (homeowner’s insurance / 12)
- PMI (if down payment < 20%, until you have 20% equity)
This total is called PITI.
How to reduce mortgage costs
- Higher down payment — reduces loan and may eliminate PMI
- Shorter tenure — dramatically reduces total interest
- Extra payments — even small monthly extras accelerate payoff
- Refinance — if rates drop by 0.5%+ after purchase
- Bi-weekly payments — equals one extra monthly payment per year
Calculate your mortgage with the OurDailyCalc mortgage calculator.
TL;DR
- Mortgage uses the standard EMI formula on a larger principal
- 20%+ down payment avoids PMI and saves significantly on interest
- 15 vs 30 year tenure: ~$186K difference in interest on a $240K loan
- Extra payments are the simplest way to pay off early
OurDailyCalc Team
OurDailyCalc — beautiful tools for everyday calculations.