Mortgage & Equity
5 Your Monthly Payment
This section will discuss:
Calculating what your monthly payments will be for a certain mortgage amount.
Comparing 15- and 30-year mortgage terms.
Your monthly house payment includes the mortgage payment plus property taxes and insurance. The mortgage portion is made up of principal and interest. Each year your credit union lender will tell you how much total interest you've paid-information you'll need for tax preparation. It's the interest portion of your payments that may be tax deductible on your federal income taxes.
Over the life of the loan, your mortgage amortizes, the process by which you gradually pay down the loan. In the early years of your mortgage, most of your payment goes toward interest. As years go by, the breakdown of your payment between principal and interest gradually shifts. By the last year, almost all your payment is toward principal, and only a small amount is for interest. If you'd like to see an amortization schedule for your mortgage amount, your credit union lender will be glad to produce one.
Now let's calculate what your total monthly payment will be. Click here to help determine the figure. Note: This calculation does not include private mortgage insurance.
A 15-year mortgage term-if you can afford the bigger monthly payments-will drastically reduce the total interest you pay over the life of the loan. For example, for a 30-year, $90,000 mortgage, with a rate of 8 percent, the total interest you would pay (this is in addition to the $90,000 principal) would be $148,000. That interest total plunges to $41,000 for a 15-year mortgage at the same interest rate.
