80 15 Loan Calculator

The 80/15 loan is a popular mortgage repayment strategy that divides your monthly mortgage payment into two parts: 80% for the principal and 15% for interest. This approach helps borrowers build equity faster while keeping interest payments manageable. Our calculator helps you determine how this strategy affects your mortgage payments and savings over time.

What is an 80/15 Loan?

An 80/15 loan is a mortgage repayment strategy where your monthly payment is divided into two parts:

80% of the payment goes toward the principal (the amount you owe)
15% of the payment goes toward interest

This approach is particularly popular among first-time homebuyers and investors who want to build equity quickly while keeping interest payments reasonable. The remaining 5% of your payment covers property taxes, insurance, and other fees.

Note: The 80/15 rule is a general guideline. Your actual payment distribution may vary based on your loan terms, interest rate, and other factors.

How the 80/15 Loan Works

The 80/15 loan strategy works by focusing on paying down the principal balance of your mortgage as quickly as possible. Here's how it works in practice:

Step 1: Calculate Your Monthly Payment

First, determine your total monthly mortgage payment using a standard mortgage calculator. This payment includes principal, interest, property taxes, insurance, and other fees.

Step 2: Apply the 80/15 Rule

Take 80% of your total monthly payment and apply it directly to the principal balance of your mortgage. The remaining 15% will go toward interest.

Step 3: Track Your Progress

Monitor how quickly you're paying down your principal balance. The faster you reduce your principal, the sooner you'll be debt-free and the more equity you'll build in your home.

Monthly Payment = P * (r(1+r)^n) / ((1+r)^n - 1) Where: P = Principal loan amount r = Monthly interest rate (annual rate / 12) n = Number of payments (loan term in years * 12)

Worked Example

Let's look at an example to see how the 80/15 loan strategy works in practice.

Scenario

Loan amount: $200,000
Interest rate: 4% (0.333% per month)
Loan term: 30 years (360 months)

Step 1: Calculate Monthly Payment

Using the standard mortgage formula:

Monthly Payment = $200,000 * (0.00333(1+0.00333)^360) / ((1+0.00333)^360 - 1) Monthly Payment ≈ $1,073.64

Step 2: Apply 80/15 Rule

80% of $1,073.64 = $858.91 (Principal)
15% of $1,073.64 = $161.05 (Interest)
Remaining 5% = $53.68 (Taxes, insurance, etc.)

Step 3: Track Progress

After one year (12 payments):

Total principal paid: $858.91 * 12 = $10,306.92
Remaining principal: $200,000 - $10,306.92 = $189,693.08
Total interest paid: $161.05 * 12 = $1,932.60

After five years (60 payments):

Total principal paid: $858.91 * 60 = $51,534.60
Remaining principal: $200,000 - $51,534.60 = $148,465.40
Total interest paid: $161.05 * 60 = $9,663.00

FAQ

What is the 80/15 loan strategy?

The 80/15 loan strategy is a mortgage repayment approach where 80% of your monthly payment goes toward the principal and 15% goes toward interest. This helps borrowers build equity quickly while keeping interest payments manageable.

Is the 80/15 rule suitable for all borrowers?

The 80/15 rule is a general guideline and may not be suitable for everyone. Factors like your financial situation, loan terms, and risk tolerance should be considered before adopting this strategy.

How does the 80/15 rule affect my interest payments?

By focusing on paying down the principal, the 80/15 rule reduces your interest payments over time. However, it may result in a higher total interest cost compared to other repayment strategies.

Can I use the 80/15 rule with adjustable-rate mortgages?

The 80/15 rule is typically used with fixed-rate mortgages. With adjustable-rate mortgages, interest rates can change, making it more difficult to predict your payments.