# How to Calculate Home Loan Interest

by Michael Keenan ; Updated July 27, 2017Home loans typically carry a fixed monthly payment over the term of the loan, unless you have an adjustable-rate mortgage, in which case your monthly payment can change each time the benchmark interest rate adjusts. However, the amount of each payment that goes toward paying down the interest changes dramatically from the start of the loan to when it ends. At the start, almost all of your payment goes toward the interest, but by the end almost all goes toward paying back the principal you owe. Therefore, you have to recalculate the interest each month.

Check your mortgage statement to find your annual interest rate and your current outstanding balance.

Divide your annual interest rate by 1,200 to change it from an annual percentage to a monthly rate. For example, if you have an annual interest rate of 8.268 percent, you would divide 8.268 by 1,200 to find the monthly rate is 0.00689.

Multiply your monthly rate by your current mortgage balance to find the monthly interest on your home loan. In this example, if the mortgage balance equals $381,140, you would multiply $381,140 by 0.00689 to find that $2,626.05 of your mortgage payment that month will go toward interest.

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The amount of your mortgage monthly payment does not affect how much of the payment goes toward interest. Whatever is left of your monthly payment after paying the interest will decrease the principal owed on your home loan.