Mortgage calculator

On a $400K loan at 7%, adding $200/month to your payment pays off the mortgage 7 years early and saves $118,000 in interest. That's a return no savings account can match. The boring discipline of an extra $200 buys you seven years of freedom. Even $100/month saves $71,000 and cuts 4.5 years off the loan.

A $400K loan at 7% for 30 years costs $558,000 in interest. The same loan at 6.5% for 15 years costs $227,000 in interest—a $331,000 difference. The catch: your monthly payment jumps from $2,661 to $3,484. But if you can afford the extra $823/month, you save a third of a million dollars.

Interest is calculated on the remaining balance. When you owe $400,000, the monthly interest at 7% is about $2,333. Your $2,661 payment leaves only $328 for principal. That's why early payments feel like treading water. By year 20, you'll owe $185K and most of your payment finally goes to principal. Amortization rewards patience—or extra payments.

P&I is just the loan. Add property tax ($200–$1,000/month depending on location), homeowner's insurance ($100–$300/month), PMI if under 20% down ($100–$300/month), and HOA fees if applicable. A $2,661 P&I payment can easily become $3,500–$4,000 in total housing cost. Budget for the full picture, not just the mortgage.

One point costs 1% of the loan ($4,000 on a $400K mortgage) and typically lowers your rate by 0.25%. That saves about $60/month and $21,600 over 30 years. Break-even: about 5.5 years. If you'll stay longer than that, points pay off. If you might move or refinance sooner, skip them.

Take the loan amount, monthly interest rate (annual rate ÷ 12), and total payments (years × 12). Use the amortization formula: P × [r(1+r)^n] / [(1+r)^n − 1]. For a $400K loan at 7% for 30 years: $400,000 × [0.00583(1.00583)^360] / [(1.00583)^360 − 1] = $2,661/month. This covers principal and interest only—not taxes or insurance.

7% is historically moderate but feels high compared to the 3% rates of 2020–2021. The 50-year average is around 7.7%. At 7%, a $400K loan costs $558K in interest over 30 years. At 6%, it's $463K. At 5%, $373K. Whether 7% is 'good' depends on your alternatives—waiting for rates to drop means paying rent and risking home prices rising.

15-year saves money; 30-year saves cash flow. A $400K loan at 6.5% for 15 years costs $3,484/month but only $227K total interest. At 7% for 30 years, it's $2,661/month but $558K interest—$331K more. If you can afford the higher payment and won't invest the difference, 15-year wins. If the extra $823/month would go to retirement accounts earning 8%+, 30-year might be smarter.

On a $400K loan at 7% for 30 years, paying an extra $500/month saves $189,000 in interest and pays off the loan 12 years early. You'd pay off a 30-year mortgage in 18 years. Even $100/month extra saves $71,000 and cuts 4.5 years. Extra principal payments have an effective return equal to your interest rate—guaranteed, tax-free.

The 28% rule suggests keeping housing costs under $2,333/month on $100K gross income. After estimated tax ($400) and insurance ($150), that leaves about $1,783 for P&I. At 7% for 30 years, that supports roughly a $268K loan—so a $335K house with 20% down. But 'can afford' and 'should buy' aren't the same. Factor in your other debts, savings goals, and job stability.

One point costs 1% of the loan and typically lowers your rate by 0.25%. On a $400K mortgage, one point costs $4,000 and saves about $60/month ($21,600 over 30 years). Break-even is about 5.5 years. Buy points if you'll stay longer than break-even. Skip them if you might move, refinance, or want to keep cash for emergencies. The math favors points for long-term owners.