How to Calculate Interest Rate Spread

Estimate your monthly home loan repayments including interest.

function calculateMortgage() { var homePrice = parseFloat(document.getElementById("homePrice").value); var downPayment = parseFloat(document.getElementById("downPayment").value); var annualRate = parseFloat(document.getElementById("interestRate").value); var years = parseInt(document.getElementById("loanTerm").value); if (isNaN(homePrice) || isNaN(downPayment) || isNaN(annualRate) || homePrice <= 0) { alert("Please enter valid positive numbers for all fields."); return; } var loanAmount = homePrice – downPayment; if (loanAmount <= 0) { alert("Down payment cannot be greater than or equal to the home price."); return; } var monthlyRate = (annualRate / 100) / 12; var numberOfPayments = years * 12; var monthlyPayment = 0; if (monthlyRate === 0) { monthlyPayment = loanAmount / numberOfPayments; } else { monthlyPayment = loanAmount * (monthlyRate * Math.pow(1 + monthlyRate, numberOfPayments)) / (Math.pow(1 + monthlyRate, numberOfPayments) – 1); } var totalRepayment = monthlyPayment * numberOfPayments; var totalInterest = totalRepayment – loanAmount; document.getElementById("monthlyValue").innerText = "$" + monthlyPayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("resultSummary").innerHTML = "Loan Amount: $" + loanAmount.toLocaleString() + "" + "Total Interest Paid: $" + totalInterest.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}) + "" + "Total Cost of Loan: $" + totalRepayment.toLocaleString(undefined, {minimumFractionDigits: 2, maximumFractionDigits: 2}); document.getElementById("mortgageResult").style.display = "block"; }

How This Mortgage Calculator Works

Purchasing a home is one of the most significant financial decisions you will ever make. Our Mortgage Monthly Payment Calculator helps you visualize your financial commitment by breaking down your Principal and Interest (P&I) payments based on current market variables.

The calculation uses the standard amortization formula:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]

Where:

• M: Total monthly payment
• P: Principal loan amount (Home price minus down payment)
• i: Monthly interest rate (Annual rate divided by 12)
• n: Number of months in the loan term

Factors That Influence Your Monthly Payment

1. Down Payment Size

The more money you put down upfront, the less you need to borrow. A higher down payment reduces your monthly principal and may even help you secure a lower interest rate from lenders. Furthermore, if you put down less than 20%, you may be required to pay Private Mortgage Insurance (PMI), which is not included in the basic P&I calculation above.

2. Interest Rates

Even a 0.5% difference in interest rates can result in tens of thousands of dollars in savings over the life of a 30-year loan. Rates are influenced by your credit score, the economy, and the Federal Reserve's policies.

3. Loan Term Duration

A 15-year mortgage typically offers a lower interest rate but requires a much higher monthly payment because you are paying off the principal twice as fast. Conversely, a 30-year mortgage offers lower monthly payments but results in significantly higher interest costs over time.

Example Mortgage Scenarios

Home Price	Down Payment	Rate	Term	Monthly Payment
$300,000	$60,000 (20%)	6.0%	30 Years	$1,438.92
$500,000	$100,000 (20%)	7.0%	30 Years	$2,661.21
$400,000	$80,000 (20%)	5.5%	15 Years	$2,615.12

Tips for Lowering Your Mortgage Payment

• Improve your credit score: A score above 740 usually secures the best available market rates.
• Shop around: Get quotes from at least three different lenders to compare Annual Percentage Rates (APR).
• Consider "Points": You can pay an upfront fee (discount points) to the lender to lower your interest rate for the duration of the loan.
• Adjust the term: If the 15-year payment is too high, look at a 20-year or 30-year option to increase your monthly cash flow.