How It Works

Total interest is the difference between what you’ll pay in total and what you borrowed. This reveals the true cost of a loan beyond the principal.

Formula

=Total Payments - Principal
=(Monthly Payment × Number of Payments) - Principal

Or combined:

=(PMT(rate/12, periods, -principal) * periods) - principal

Example

Mortgage:

Principal: $300,000
Interest Rate: 7%
Term: 30 years (360 months)

Step 1 - Monthly Payment:

=PMT(7%/12, 360, -300000)

Result: $1,995.91

Step 2 - Total Interest:

=(1995.91 * 360) - 300000

Result: $418,527.60

You’ll pay $418,527 in interest - more than the house price itself!

Quick Reference Table

Loan Amount	Rate	Term	Monthly Payment	Total Interest
$300,000	7%	30 yr	$1,996	$418,528
$300,000	7%	15 yr	$2,696	$185,367
$300,000	6%	30 yr	$1,799	$347,515
$25,000	6.5%	5 yr	$489	$4,349

Variations

Using Cell References

=(PMT(B1/12, B2*12, -B3) * B2*12) - B3

Where B1=rate, B2=years, B3=principal

Compare 15-Year vs 30-Year

Create a comparison table:

15-year interest: =(PMT(rate/12, 180, -principal) * 180) - principal
30-year interest: =(PMT(rate/12, 360, -principal) * 360) - principal
Savings: =30_year_interest - 15_year_interest

Pro Tips

Use CUMIPMT for precision: =CUMIPMT(rate/12, periods, principal, 1, periods, 0) gives exact cumulative interest
Calculate interest savings from extra payments by comparing totals
Factor in tax deductions - mortgage interest may be deductible, reducing effective cost

Why This Matters

Understanding total interest helps you:

Compare loan offers beyond just the monthly payment
Decide between loan terms (15 vs 30 years)
Evaluate if refinancing makes sense
Motivate extra principal payments