How to Calculate the True Cost of a Mortgage

The true cost of the mortgage includes all the interest you pay.

The true cost of the mortgage includes all the interest you pay.

Most people can't afford to buy a home without taking out a mortgage -- and they also may not realize how much they will pay in interest over the life of the mortgage. When you're taking 30 years to repay a six-figure loan, the monthly payments for the first couple years are almost all interest. There's still a lot of interest on a 15-year mortgage, but since you're making higher monthly payments, the principal gets paid off more quickly. Comparing the costs of two different mortgages can help you decide whether a higher monthly payment and shorter term are worth the extra monthly payment.

Multiply 12 by the number of years in the term of your mortgage to figure the total number of monthly payments. For example, if you take out a 15-year mortgage, you will make 180 payments, compared to 360 payments for a 30-year mortgage.

Multiply the number of monthly payments by the amount of each mortgage monthly payment. For example, say you have a $200,000, 30-year mortgage at 6 percent. Your mortgage monthly payment is $1,199.10 on a 30-year mortgage. Multiply $1,199.10 by 360 to get total payments of $431,676.

Add the closing costs for the mortgage to find the total payment you have to make related to the mortgage. In this example, if you paid $3,000 in closing costs, add $3,000 to $431,676 to find your total payments are $434,676.

Subtract the amount you borrowed for the mortgage to find the total cost of interest and closing costs on your mortgage. Finishing the example, if your mortgage was $200,000, subtract $200,000 from $434,676 to find that you'll pay $234,676 in interest and closing costs over the 30-year term.


  • Taking a mortgage with a shorter term saves you a lot in interest over the life of the loan. For example, say you took out the same $200,000 mortgage at 6 percent, except for a 15-year term. The monthly payment goes up to $1,687.71, but over the life of the loan, your interest totals only $103,788.46, compared to $231,676 in interest on the 30-year loan.

About the Author

Mark Kennan is a writer based in the Kansas City area, specializing in personal finance and business topics. He has been writing since 2009 and has been published by "Quicken," "TurboTax," and "The Motley Fool."

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