A mortgage is the largest financial transaction most people ever make, yet many sign without ever computing the total interest. Four pieces of math — payments, interest, compounding, discounts — all explained with formulas and tools.
Equal Payment vs Equal Principal
- Equal payment (annuity): same amount every month, interest-heavy early on. Smooth cash flow — good for stable incomes.
- Equal principal: fixed principal monthly, payments shrink over time; higher early burden but noticeably less total interest.
- On 1,000,000 over 30 years at 4%: annuity ≈ 4,774/month; principal starts ≈ 6,111 and falls. The principal method saves roughly 110,000 in interest.
Is Early Repayment Worth It?
The logic: money used to prepay 'earns' a risk-free return equal to your loan rate. Above ~4% with idle cash earning less, prepaying makes sense. If your investments reliably beat the rate, or repaying would gut your emergency fund, wait. Pay near a due date and choose 'shorten term' over 'reduce monthly payment' to save the most.
Compounding and Discounts: Two Numbers People Get Wrong
- Rule of 72: years to double ≈ 72 ÷ annual rate. At 6%, money doubles in ~12 years — and inflation erodes purchasing power at the same math.
- 'Spend 300, save 50' is not a discount if you only wanted 200 worth of stuff. True discount = what you actually pay ÷ what you actually wanted.
Recommended Tools
Loan Calculator
Compare equal-payment and equal-principal loans — monthly payment and total interest instantly.
Compound Interest Calculator
See how your money grows with compound interest — principal, rate and years is all you need.
Discount Calculator
Convert discount rates to final prices and savings, including spend-and-save deals.
Percentage Calculator
Three modes: percent of a number, what percent X is of Y, and change between two values.
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FAQ
How much monthly payment is safe?
Common guidance: under 40-50% of household income, with six months of payments in reserve. The approved limit is the bank's ceiling, not your comfort zone.
Compound vs simple interest — how big is the gap?
100,000 at 5% for 20 years: simple interest returns 200,000 total; compounded returns about 265,000 — a 65,000 gap. The longer the horizon, the more it matters.