Money, Explained From the Inside

Tools / Borrow / Chapter 13 · Mortgages and the Rent-or-Buy Question

Mortgage explorer

See how much of a mortgage is interest, what overpayments do, and whether you could survive a rate rise.

1 · The idea

Mortgage payment

The same level-payment formula as any amortising loan. In the early years most of each payment is interest; the balance falls slowly at first and faster later.

The formula

Payment = P × r ÷ (1 − (1 + r)^−n)

P
amount borrowed (price − deposit)
r
monthly rate (annual ÷ 12)
n
number of monthly payments (years × 12)

2 · A worked example

$200,000 borrowed at 6% over 30 years: payment $1,199.10, total interest $231,676. Overpaying $200.00 a month ends the mortgage 9 years early and saves $79,801 in interest.

3 · Now use your own numbers

Change anything. The result updates instantly.

Try an example

Tax, insurance and maintenance.

Borrowed
$240,000
Monthly mortgage payment
$1,473.81
Total interest over the term
$202,14346% of everything you pay
With overpayments
21 yearsSaves $40,385 and 4 yr 4 mo
Payment if rates rise 2 points
$1,773.58+$299.77 a month
All-in monthly cost of owning
$1,848.81Includes $375.00 running costs
05k10k15k20k15913172125
Years on the horizontal axis.
  • Interest paid in the year
  • Principal repaid in the year

What this means

The chart shows the shape of a mortgage: early payments are mostly interest. Overpaying early has a large effect because it reduces the balance that interest is charged on for decades.

The stress payment is the question to ask before you sign: if rates rose, could you still pay without borrowing elsewhere?

Illustrative, not personal advice. Inspired by Chapter 13 · Mortgages and the Rent-or-Buy Question of Money, Explained From the Inside. Your figures stay in this browser. Real products add terms, taxes and conditions that this simple model leaves out.

4 · Take care

What this tool can’t see

  • Check whether your lender caps overpayments or charges for them.
  • Running costs (tax, insurance, maintenance) are estimated as a share of price: replace with local figures.
  • Variable and fixed-period mortgages reset: model the stress payment.

5 · Go further

Where this fits

See it in a life:

Anir & KatiaThe biggest decision of their lives

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