How the result is calculated
Buying a home produces two bills, one every month and one on completion day, and most mortgage calculators forget the second. Pick the country you are buying in, and where the transfer tax is set regionally, pick the region. Each country has a page of its own with the rules that apply only there; this guide covers the method they all share, and then the four places where the countries part company.
Principal and interestP × r ÷ (1 − (1 + r)−n)
Monthly paymentprincipal and interest + property tax ÷ 12 + insurance ÷ 12 + building charge + mortgage insurance
Cash to completedeposit + transfer tax + other buying costs + any insurance paid in cash
- P
- the loan: Price − Deposit, plus any premium that is capitalised into it
- r
- the rate per month: the quoted annual rate divided by 12 under the nominal convention most countries use
- n
- the number of monthly payments: the term in years × 12
Worked example
| Item | Amount | How it is obtained |
|---|---|---|
| Home price | $400,000.00 | Home price |
| Down payment | $80,000.00 | 20% of the price |
| Loan, P | $320,000.00 | 400,000 − 80,000 |
| Rate per month, r | 0.54167% | 6.5% ÷ 12 |
| Number of payments, n | 360 | 30 years × 12 |
| Principal and interest | $2,022.62 | 320,000 × 0.0054167 ÷ (1 − 1.0054167−360) |
| Property tax | $366.67 | 1.1% × 400,000 ÷ 12, a national representative rate |
| Home insurance | $125.00 | 1,500 a year ÷ 12 |
| Mortgage insurance | $0.00 | PMI is not charged with 20% or more down |
| Total monthly payment | $2,514.29 | 2,022.62 + 366.67 + 125.00 |
| Item | Amount | How it is obtained |
|---|---|---|
| Deposit | $80,000.00 | 20% of the price |
| Transfer and recording tax | $1,600.00 | 0.4% × 400,000, a representative buyer-side rate |
| Other buying costs | $8,000.00 | 2% of the price: lender, title, appraisal, escrow and prepaid items |
| Cash to complete | $89,600.00 | 80,000 + 1,600 + 8,000 |
Over the 30 years the schedule charges $408,140.64 of interest, so the loan costs more in interest than it lends. The example inputs are the country's opening figures, illustrative rather than a lender quote.
Reading the result
The headline is the total monthly payment, with principal and interest shown separately beneath it so you can match the lender's own figure. Loan amount, cash to complete, total interest and total cost of ownership follow, and every one of them opens on the working that produced it.
The monthly cost table lists each part of the payment, principal and interest, property tax, insurance, any building charge and any mortgage insurance, with its annual equivalent beside it. Mortgage insurance appears there for as long as it is charged, not for the whole term, and the line says when it stops.
The amortisation table shows principal and interest only. Tax, insurance and the building charge are added on top each month, which is why the headline payment is larger than the table's. The schedule switches between By year and Every month: a year row adds up its payments to the cent, so the years foot to the totals, and the CSV download exports whichever view is on screen. The model rounds each month's interest to the currency's smallest unit, which can give a slightly different total from an unrounded closed-form calculation, so both are shown. Lenders can use different day-count, rounding and payment conventions.
What changes the result
Transfer tax, and why it needs a region
The one-off tax on buying is usually the largest single cost after the deposit, and it is charged on a different basis in almost every country. Three things vary: whether it is a flat percentage or a set of marginal bands, who pays it, and which level of government sets the rate.
The United States is the awkward case, because all three answers are local. Transfer and recording tax is set by state, county and sometimes city, ranges from nothing in thirteen states to over 2%, and in much of the country is paid by the seller rather than the buyer. The 0.4% used here is a representative buyer-side figure; your county recorder has the real one. American closing costs (lender, title, appraisal, escrow and prepaid items) do the rest of the damage, commonly 2% to 5% of the price.
Elsewhere the tax is usually national and statutory, so the figure is exact rather than indicative. Where a country sets the rate below the national level, as a German Bundesland, a Spanish comunidad autónoma or a French département does, there is a region selector, and leaving it unset gives a national placeholder rather than the number you will pay. The derivation under the transfer-tax figure shows the bands it applied and where the rate was set. New Zealand is the outlier in the other direction: no transfer tax at all.
Mortgage insurance is four different products
When the deposit is small, lenders want protection, and how they get it differs completely. It is not one field with different numbers in it, so the calculator shows whichever of the four your country actually uses, or none.
- A yearly percentage charged monthly. American PMI is typically 0.3% to 1.5% of the loan a year, charged monthly while you owe more than 80% of the purchase price. The Homeowners Protection Act requires the lender to cancel it on request at 80% and automatically at 78%, so it ends part-way through the loan. Paying extra each month brings that date forward, and the schedule here moves the cancellation date with it.
- A one-off premium added to the loan. Compulsory above a threshold, banded by loan-to-value and capitalised, so it is not cash you find on the day but you pay interest on it for the whole amortisation. Canada and Australia work this way.
- A one-off premium you choose to buy. The Netherlands setting models an optional guarantee fee. Eligibility and any rate discount depend on the scheme and lender; compare the fee with the offered benefit rather than assuming it saves money.
- Nothing at all. Ten of the fifteen countries here have no such product. Britain, Germany, France, Spain, Ireland, Sweden, Finland, Japan, India and Sri Lanka price the risk into the rate, cap the loan-to-value by regulation, or both. A calculator that shows a PMI field in those countries is inventing a cost.
Property tax is not always a percentage
Where the recurring tax is a share of the property's value, as in the United States, the input is a percentage and moves with the price. American effective rates run from about 0.3% in Hawaii to 2.2% in New Jersey, so the 1.1% used here is close to the national median and nowhere near a promise.
Where the tax is instead a flat annual bill, set by a council or worked out from a rental or cadastral value that has little to do with what you paid, the input is the yearly amount. The label changes with the country so it always says what your own bill says. Either way the figure is a national representative: the real bill is set by your municipality.
Extra payments and the term
An extra monthly payment goes to principal, shortens the schedule and, where mortgage insurance is charged monthly, ends it sooner too. A longer term lowers the payment and raises the total interest; compare terms on the total-cost line rather than the monthly figure.
What is not included
- First-time buyer reliefs. Most countries have them and they can be worth a great deal: British first-time buyers pay nothing to 300,000, Dutch buyers under 35 pay no transfer tax at all under the ceiling, and every Australian state runs its own concession. None are modelled, so the transfer tax shown is the standard rate.
- New-build purchases. In much of Europe a new home is sold with VAT instead of transfer tax, on a completely different basis.
- Additional-property surcharges. Buying a second home or a rental usually costs more: 5% extra in Britain, 8% instead of 2% in the Netherlands.
- Sub-national property tax. The recurring tax figure is a national representative, and the real bill is set by your municipality.
- The lender's own view. Whether you can borrow the amount is a separate question, and the debt-to-income calculator is a better guide to it.
Using the result
Compare the cash-to-complete figure with what you actually have before you compare monthly payments, because it is the one that decides whether a purchase can happen at all. Then use the total-cost figure to compare terms rather than payments: a longer term always looks cheaper monthly and is almost always dearer in the end. And where you have a choice of region, look at what the transfer tax does to the total, because on the same house it can be worth more than a year of payments.