How do you compute the monthly interest on a mortgage loan?

1 Answer

You take the beginning balance, multiply it times the annual interest rate, and divide it by 12 months. Mortgage interest is calculated on a 360 day year with 30 day months.

Initial prepaid interest at closing and daily accrued interest at payoff are calculated based on the actual number of days involved in that particular month.

Example: $100,000 opening balance, 6% interest rate, 30 year loan. P&I payment, $599.55. First month interest $500. New balance $99,900.45. 2nd month interest, $499.50.

Brief 12 month amortization schedule below, calculated with excel.

**Loan Amount:** $100,000

**Rate:** 6%

**Periods: **360
**P&I****Principal****Interest****Balance**1$599.55$99.55$500.00$99,900.452$599.55$100.05$499.50$99,800.403$599.55$100.55$499.00$99,699.854$599.55$101.05$498.50$99,598.805$599.55$101.56$497.99$99,497.246$599.55$102.06$497.49$99,395.187$599.55$102.57$496.98$99,292.618$599.55$103.09$496.46$99,189.52