Tracking Mortgage Interest: How Much Have I Paid?

There are several ways to determine the amount of mortgage interest you have paid. One way is to use a mortgage calculator, which can be found on websites such as Bankrate, SmartAsset, and Investopedia. These calculators can help you estimate your monthly mortgage payments, including interest, by taking into account factors such as the loan amount, interest rate, loan term, and down payment. Another way to determine the mortgage interest paid is to use a spreadsheet program such as Microsoft Excel, which has a function called CUMIPMT that calculates the total interest paid over the life of the loan. Additionally, if you have elected to receive electronic tax forms, you can look for Form 1098, which will state the amount of interest you paid for the year.

Using a mortgage calculator

To use a mortgage calculator, you'll need to input the following:

• The price of the home
• The down payment amount
• The mortgage interest rate
• The loan term (number of years)

Some calculators may also ask for additional information, such as the following:

• Annual property tax
• Annual home insurance premium
• Monthly homeowner association (HOA) fee
• Monthly cost of mortgage insurance
• ZIP code

Once you have input the required information, the calculator will display your monthly payment, including a breakdown of the principal and interest portions. It will also show you the total interest you will pay over the life of the loan, as well as the total principal plus interest.

You can use the calculator to adjust loan details and compare different loan scenarios. For example, you can see how making extra payments or choosing a shorter-term loan will impact your monthly payments and the total interest you will pay.

Keep in mind that mortgage calculators provide estimates, and your actual payments may vary based on additional fees and costs, and changes in property tax and interest rates over time.

Understanding the formula

To calculate the interest on a simple interest loan, you can use the formula: SI = P * R * T. In this formula, SI represents the total interest paid, P is the principal amount, R is the interest rate (expressed as a decimal), and T is the loan term in years. For example, if you borrow $300,000 with an interest rate of 4% for a period of 30 years, the calculation would be: SI = $300,000 * 0.04 * 30. This calculates the total interest paid over the life of the loan.

However, mortgages are typically amortized loans, which means that the calculation can be more complex. In an amortized loan, you pay more interest at the beginning, and the proportion of interest paid decreases over time, while the proportion of the principal paid increases. To calculate the monthly interest for an amortized loan, you would multiply the principal balance by the annual interest rate, and then divide that number by 12 (the number of months in a year). For instance, if you have a principal balance of $300,000 and an interest rate of 4%, the monthly interest would be calculated as: ($300,000 * 0.04) / 12, resulting in $1,000 of interest per month.

Additionally, you can use spreadsheet programs such as Microsoft Excel, Google Spreadsheets, or Apple Numbers to calculate mortgage interest. These programs offer a function called CUMIPMT, or cumulative interest payment. This function takes into account the interest rate, number of payments, and principal amount to determine the total interest paid over the life of the loan. By using this function, you can easily calculate the total interest paid and then divide it by the number of months or years to find the monthly or annual interest amount.

Spreadsheets

Microsoft Excel is a great tool to calculate mortgage-related expenses like interest and monthly payments. You can also use spreadsheets from Google or Microsoft for free.

To create a mortgage calculator in Excel, start by opening a new spreadsheet and creating your "Categories" column in the "A" column. You can do this by clicking and dragging the divider between columns "A" and "B" to the right.

In the “B” column, directly to the right of the "Categories" column, enter your values. These values include your loan amount, annual interest rate, life loan value (the amount of time you have to pay off the loan), the number of payments per year, and the total number of payments.

Next, calculate the total number of payments by multiplying your life loan value by the number of payments per year. You can also use the following formula:

> =-NPER(rate, pmt, pv, [fv], [type], [guess])

Where:

• Rate = the interest rate per period
• Pmt = the payment made each period
• Pv = the present value of the loan
• Fv = the future value or desired balance after the last payment
• Type = 0 for annuity payments or 1 for payments due at the end of the period
• Guess = a number that you guess is close to the result

To calculate the interest paid, add the total amount with interest to the amount of the loan. You can use the following formula:

> =-IPMT(rate, per, nper, pv, [fv], [type])

Where:

• Rate = the constant interest rate per period
• Per = the period for which you want to calculate the interest
• Nper = the total number of payments during the lifetime of the loan
• Pv = the present value of the loan or the amount borrowed
• Fv = the future value or desired balance after the last payment
• Type = 0 for annuity payments or 1 for payments due at the end of the period

Finally, create a Payment Schedule template to the right of your Mortgage Calculator template. This will allow you to see how much you'll owe or pay off per month. Include separate columns for the date, payment number, total amount paid, interest, and principal. Sum the payments, interest, and principal at the bottom of the table and cross-reference these values with your mortgage calculator to ensure they match.

Tax forms

To determine the amount of mortgage interest you have paid, you should receive a Form 1098, 'Mortgage Interest Statement', from your lender. This form is used to report mortgage interest paid and allows you to claim a deduction for the amount of interest you have paid on your mortgage over the year.

Form 1098 is sent to borrowers and the IRS by lenders when the borrower has paid $600 or more in interest or expenses (such as mortgage points) on a single mortgage. If you have multiple mortgages, you will receive a separate Form 1098 for each one. The form will show you the total amount of interest paid, as well as other related expenses.

You can then use Form 1098 to calculate your mortgage interest deduction if you itemize your taxes. This deduction can be claimed on your federal income tax return to reduce how much you owe. You will need to use Tax Form 1040 (Schedule A) when filing your taxes to claim the deduction.

There are other 1098 forms that are used to report tax-deductible payments, such as Form 1098-E for student loan interest, Form 1098-T for tuition payments, and Form 1098-C for the donation of a motor vehicle, boat, or airplane.

Amortization

With mortgage amortization, a portion of your monthly payment goes towards the principal (the amount you borrowed), and another portion goes to interest. The interest is the amount the bank charges for lending you the money. The interest is typically provided as a percentage, with the interest rate being a given fraction of the principal.

Mortgage amortization schedules (or tables) detail each periodic payment on an amortizing loan. Each repayment for an amortized loan will contain both an interest payment and a payment towards the principal balance, which varies for each pay period. An amortization schedule helps indicate the specific amount that will be paid towards each, along with the interest and principal paid to date, and the remaining principal balance after each pay period.

There are several online mortgage amortization calculators that can help you determine how much of your payments will go to principal and interest throughout the life of your loan. These calculators can also help you decide whether to prepay your mortgage and by how much.

To calculate mortgage interest manually, you can multiply your monthly payment by the total number of payments you'll make, then subtract the principal amount from that number to get your mortgage interest.

Frequently asked questions