Mortgage Interest Calculation Guide

Tuna TAS
Jul 7
2 min read

One of the most common ways to buy a home is by taking out a mortgage loan. Before applying, it’s crucial to understand how interest rates and repayment schedules are calculated to make an informed financial decision.

1. What Is Mortgage Interest?

A mortgage loan is repaid with an added annual interest rate.
Rates vary depending on banks, market conditions, and your credit score.

2. How Is It Calculated?

Mortgage payments are based on the annuity formula (equal installments):

📌 Monthly Payment = (Principal × Monthly Interest Rate) / (1 – (1 + Monthly Interest Rate)^(-Number of Months))

Example:

Loan: 1,000,000 TRY, 3% monthly interest, 120 months
Monthly payment ≈ 34,490 TRY
Total repayment ≈ 4,138,800 TRY

3. Factors That Affect the Calculation

Interest Rate: Varies by bank, directly affects the cost.
Loan Term: Longer terms lower monthly payments but increase total repayment.
Additional Costs: File fees, appraisal fees, and insurance must be included.

4. Key Considerations

Look at the effective annual cost rate (APR), not just the nominal interest.
Ensure monthly payments fit your budget.
Compare offers from multiple banks.

Knowing how to calculate mortgage interest protects you from unexpected costs and helps secure your investment. Smart planning leads to a safer, long-term financial strategy.

Practical Guide: Mortgage Loan Calculation

Topic	Key Consideration
Interest Rate	Should be calculated monthly; check the effective annual cost (APR)
Loan Term	Longer terms = lower monthly, higher total repayment
Monthly Payment	Use the annuity formula for accuracy
Extra Costs	Include insurance, appraisal, and bank fees
Comparison	Always compare total costs from different banks