Mortgage Interest
Mortgage interest is the cost of borrowing for your home. It's calculated monthly as Balance × (Rate ÷ 12). On a $300K loan at 6.5% for 30 years, you pay ~$382K in interest—more than the principal. In year one, about 83% of your payment goes to interest.
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Early years pay mostly interest; principal builds slowly. 0.5% lower rate on $300K can save $30K–$50K over 30 years. 15-year loans typically cut total interest by half. Extra payments go straight to principal and reduce future interest.
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Why: Understanding mortgage interest helps you make smarter decisions about extra payments and refinancing.
How: Interest = Remaining Balance × (Annual Rate ÷ 12). Each payment covers interest first; the rest reduces principal. Early payments are interest-heavy; later payments shift toward principal.
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📋 Quick Examples — Click to Load
📊 Interest by Year
📈 Cumulative Interest
🍩 Year 1 Interest vs Principal
📊 Rate Impact on Total Interest
For educational purposes only — not financial advice. Consult a qualified advisor before making decisions.
💡 Money Facts
On a 30-year $300K loan at 6.5%, you pay more in interest ($382K) than the house cost.
— CFPB
In year 1, ~83% of your payment is interest; by year 25, it flips to mostly principal.
— Freddie Mac
A $100 extra monthly payment on $300K can save ~$30K and cut 4+ years off the loan.
— Bankrate
Refinancing from 7% to 6% on $400K saves ~$80K over 30 years.
— Bankrate
Daily interest on a $500K loan at 6.5% is roughly $89—about $1,000 every 11 days.
— Freddie Mac
Mortgage interest is the cost of borrowing money for your home. It's calculated monthly as: Balance × (Rate ÷ 12). On a $300K loan at 6.5% for 30 years, you pay ~$382K in interest—more than the principal. In year one, about 83% of your payment goes to interest. Understanding this helps you make smarter decisions about extra payments and refinancing.
Sources: CFPB, IRS Publication 936, Freddie Mac, Bankrate.
Key Takeaways
- • Front-loaded interest: Early years pay mostly interest; principal builds slowly.
- • Rate matters: 0.5% lower rate on $300K can save $30K–$50K over 30 years.
- • Shorter term = less interest: 15-year loans typically cut total interest by half.
- • Extra payments go straight to principal and reduce future interest.
Did You Know?
How Does Mortgage Interest Work?
Monthly Accrual
Interest = Remaining Balance × (Annual Rate ÷ 12). Each payment covers interest first; the rest reduces principal.
Amortization Curve
Early payments are interest-heavy; later payments shift toward principal. The curve is front-loaded.
Total Interest Formula
Total Interest = (Monthly Payment × Number of Payments) − Principal. For a $300K loan at 6.5% over 30 years, that's ~$382K.
Expert Tips
15-Year vs 30-Year Interest Comparison
| Term | Monthly (6.5%) | Total Interest ($300K) |
|---|---|---|
| 15 years | ~$2,613 | ~$170K |
| 30 years | ~$1,896 | ~$382K |
Frequently Asked Questions
How is mortgage interest calculated?
Mortgage interest uses the formula: Monthly Interest = Remaining Balance × (Annual Rate ÷ 12). Each payment applies interest first, then principal. On a $300K loan at 6.5%, your first month's interest is about $1,625.
What is the difference between daily vs monthly interest accrual?
Most mortgages use monthly accrual: interest is calculated once per month on the balance. Daily accrual divides the annual rate by 365 and multiplies by days. For a $400K loan at 6%, daily interest runs ~$66/day vs ~$2,000/month.
How can I reduce my mortgage interest?
Strategies include: making extra principal payments, refinancing to a lower rate, choosing a 15-year term over 30-year, and making biweekly payments. Even $100 extra monthly on a $300K loan can save $30K+ in interest.
What is an interest-only mortgage?
Interest-only mortgages let you pay only interest for a set period (typically 5-10 years). After that, payments jump to include principal. You build no equity during the interest-only period and face higher payments later.
Is mortgage interest tax deductible?
Under IRS rules, you can deduct interest on up to $750K of mortgage debt (or $375K if married filing separately) for homes bought after 2017. You must itemize deductions. See IRS Publication 936 for details.
How much total interest do I pay on a 30-year loan?
On a $300K loan at 6.5% for 30 years, total interest is approximately $382,000—more than the principal. A 15-year loan at the same rate cuts total interest to about $170K.
Key Statistics
Official Data Sources
⚠️ Disclaimer: This calculator is for educational purposes only. Actual mortgage terms depend on credit, lender, and market conditions. Not financial advice. Consult a licensed professional for your situation.
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