Question:

How to calculate interest due for a monthly mortgage payment?

Answer:

In order to calculate interest due on your mortgage payment, you need to know your yearly rate and the loan balance. To make calculations of the interest due, take the remaining loan balance, multiply it by the interest rate, and divide by 12 to arrive at the interest due for the next month.

For example, if you have a $200,000 loan balance with 30 years left at 6%, your monthly payment will have $1000 interest due with the monthly payment (200,000 x 0.06 /12). That is, your daily interest will be 12,000 divided by the days of the year to arrive at current $32.87 daily interest due for a year of 365 days.

When closing the loan, you are prepaying the interest for the days between the closing date and the end of the month. That is, for the abovementioned loan, if you close on March 21, you will need to pay per diem interest of $328.7 for ten days until March 31. Then, the first mortgage payment will be due on May 1.

Anytime a mortgage payment is made, part of it applies to the interest and part to the principal. Even though with a fixed rate mortgage you are paying the same amount every month, interest due is reduced and a greater part of the monthly premium goes to the principal of the loan.

Mortgage rates hit their lowest since 1955. Ask the home loan experts we recommend Quicken Loans how to take advantage of them.
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