Mortgage Payment 2026: Calculate and Choose Your Rate

Buying a home is probably the most important financial decision of your life. And at the heart of this decision is the mortgage: how much can I borrow? What will my monthly payment be? Is a fixed or variable rate better? These are the questions anyone approaching a property purchase asks themselves. In this complete guide, we will explain in detail how mortgage payments are calculated, the difference between various types of interest rates, what Euribor and IRS are, and how to make the best choice for your needs in 2026.

How to Calculate Your Mortgage Payment: The Formula

Most Italian mortgages use the French amortization schedule, where the payment remains constant throughout the loan term. The formula for calculating the monthly payment is:

Payment = C x r / (1 - (1 + r)^(-n))

Where:

• C = loan amount (mortgage principal)
• r = monthly interest rate (annual rate / 12)
• n = total number of payments (years x 12)

Practical calculation example

Mortgage of 150,000 euros, fixed rate 3.20% per year, 25-year term:

• C = 150,000 euros
• r = 3.20% / 12 = 0.2667% = 0.002667
• n = 25 x 12 = 300 payments

Payment = 150,000 x 0.002667 / (1 - (1.002667)^(-300)) = 150,000 x 0.002667 / (1 - 0.4499) = 400.00 / 0.5501 = 727.10 euros per month

Total interest paid over 25 years: (727.10 x 300) - 150,000 = 218,130 - 150,000 = 68,130 euros

As you can see, on a 150,000-euro mortgage over 25 years at 3.20%, you will pay approximately 68,000 euros in interest alone. This is why it is essential to compare offers and choose carefully. With our mortgage payment calculator, you can simulate different scenarios in seconds by varying the amount, rate, and term.

The French Amortization Schedule

In the French amortization schedule (the most common in Italy), the payment is constant but its composition changes over time:

• In the early payments, the interest portion is very high and the principal portion is low
• Over time, the interest portion decreases and the principal portion increases

Example for the 150,000-euro mortgage at 3.20% over 25 years:

This explains why paying off a mortgage early is more advantageous in the first years, when the interest portion is higher.

Fixed Rate vs Variable Rate: Pros and Cons

Fixed-rate mortgage

The interest rate remains unchanged for the entire mortgage term. The payment is always the same, from the first to the last month.

• Pros: payment certainty, no surprises, easier financial planning
• Cons: initial rate generally higher than variable, you don't benefit from potential rate decreases
• Recommended when: rates are low or rising, you prefer peace of mind, your household budget is tight

Variable-rate mortgage

The rate changes over time following a reference index (usually Euribor). The payment can increase or decrease.

• Pros: lower initial rate, you benefit from rate decreases
• Cons: uncertainty about future payments, risk of significant increases
• Recommended when: rates are high and expected to fall, you have ample financial margin, the term is short

Mixed-rate or capped-rate mortgage

Intermediate solutions exist: a variable-rate mortgage with a cap sets a maximum ceiling on the rate, providing protection against excessive increases. A mixed-rate mortgage allows you to switch from fixed to variable (or vice versa) at predetermined intervals.

Euribor and IRS: The Reference Parameters

Euribor (variable rate)

Euribor (Euro Interbank Offered Rate) is the rate at which major European banks lend money to each other. Variable-rate mortgages generally use the 1-month or 3-month Euribor as their reference parameter.

In March 2026, the 3-month Euribor stands at around 2.40-2.60%, down from the 2023-2024 peaks (when it exceeded 4%) thanks to ECB rate cuts.

IRS - Eurirs (fixed rate)

The IRS (Interest Rate Swap), also known as Eurirs, is the reference parameter for fixed-rate mortgages. It represents the cost for the bank to convert a variable rate into a fixed one through a swap contract. The IRS varies by term: 10-year IRS, 20-year IRS, 30-year IRS.

In March 2026, the 20-year IRS stands at around 2.50-2.80%.

The Spread

The spread is the margin that the bank adds to the reference parameter to determine the final mortgage rate. It is the portion that compensates the bank for the risk and costs of the loan.

Fixed mortgage rate = IRS for the corresponding term + bank's spread

Variable mortgage rate = Euribor + bank's spread

In 2026, average spreads are around 0.50-1.20% for the best mortgages, depending on the applicant's profile and the LTV (Loan to Value) ratio.

How Much Can I Borrow?

Borrowing capacity depends on several factors:

The payment-to-income ratio

Banks generally do not grant mortgages whose payment exceeds 30-35% of the household's monthly net income. This is the first parameter they evaluate.

The LTV (Loan to Value) ratio

Banks generally finance up to 80% of the property's appraised value. For young buyers under 36, there are incentives that allow mortgages up to 100% of the value, thanks to the Consap Fund state guarantee.

APR vs Nominal Rate: The Difference That Matters

When comparing mortgage offers, it is essential to look at the APR (TAEG) and not just the nominal rate (TAN):

• TAN (Nominal Annual Rate): this is the pure interest rate applied to the principal. It is the rate used in the payment calculation formula.
• TAEG (Annual Percentage Rate / APR): in addition to the TAN, it includes all mandatory ancillary costs: processing fees, appraisal, payment collection fees, mandatory insurance, and substitute tax. It is the true overall cost of the loan.

Example of TAN vs TAEG difference

Two offers for a 150,000-euro mortgage over 25 years:

• Bank A: TAN 3.10%, processing fee 1,500 euros, appraisal 350 euros, insurance 3,000 euros - TAEG 3.35%
• Bank B: TAN 3.20%, processing fee 0, appraisal 0, insurance included - TAEG 3.28%

Bank B has a higher TAN but a lower TAEG: it is actually the more cost-effective offer.

Mortgage Costs: Beyond the Monthly Payment

Besides the monthly payment, a mortgage involves several additional costs:

• Processing fees: from 0 to 1,500 euros (some banks waive them as a promotion)
• Appraisal: 200-400 euros for the property valuation by a bank-appointed appraiser
• Substitute tax: 0.25% of the principal for primary residence purchase, 2% for second homes
• Notary fees: 1,500-3,000 euros for the mortgage deed
• Fire/explosion insurance: mandatory, variable cost
• Life insurance policy: not legally required, but often demanded by the bank

Mortgage Incentives in 2026

Here are the main incentives in effect in 2026:

• Mortgage interest deduction: 19% IRPEF deduction on interest payments up to 4,000 euros per year (maximum savings of 760 euros/year) for the purchase of a primary residence
• Consap Fund for under 36: state guarantee up to 80% for young people with an ISEE (income indicator) up to 40,000 euros, allowing mortgages up to 100% LTV
• Free mortgage transfer (surroga): the ability to transfer your mortgage to another bank at no cost to obtain better terms

When Does a Mortgage Transfer (Surroga) Make Sense?

A mortgage transfer (or portability) allows you to move your mortgage to another bank at zero cost, keeping the original lien. It makes sense when:

• Market rates have dropped significantly compared to when the mortgage was taken out
• There is still a significant remaining balance and a long remaining term
• The savings on the monthly payment justify the paperwork (generally, at least 50-100 euros per month in savings)

Example of a worthwhile mortgage transfer

Original mortgage: 180,000 euros at 4.50%, payment 1,013 euros, remaining balance 150,000 euros, remaining term 20 years.

Transfer to 3.20%: new payment 850 euros. Savings: 163 euros per month, approximately 39,120 euros over the remaining term.

Frequently Asked Questions

How much do I need to earn for a 200,000-euro mortgage?

With a 200,000-euro mortgage over 25 years at 3.20%, the payment is approximately 969 euros. Applying the 33% payment-to-income ratio, the minimum household net income should be approximately 2,940 euros per month. You can run precise simulations with our mortgage payment calculator.

Is a 20-year or 30-year mortgage better?

A shorter mortgage has a higher payment but much lower total interest. Example on 150,000 euros at 3.20%: over 20 years, the payment is 851 euros (total interest 54,240 euros); over 30 years, the payment is 649 euros (total interest 83,640 euros). The difference is nearly 30,000 euros more in interest.

Can I pay off the mortgage early?

Yes, without penalties for mortgages taken out after February 2, 2007 (Bersani Law). Early repayment is particularly advantageous in the first years of the mortgage, when the interest portion of the payment is higher.

What is a fixed-payment, variable-term mortgage?

It is a variable-rate mortgage where the payment stays fixed, but if the rate rises the term extends, and vice versa. It offers the certainty of a fixed monthly payment like a fixed-rate mortgage with the lower initial rate of a variable one, but the risk is ending up with a much longer mortgage than planned.

Which rate should you choose in 2026?

In 2026, with Euribor declining thanks to ECB cuts and the IRS relatively stable, the gap between fixed and variable rates has narrowed. A fixed rate around 3-3.5% offers peace of mind at a reasonable cost. Variable rates can start from 2.8-3.2% but carry the risk of future increases. The choice depends on your risk tolerance and income stability.

What is the difference between a land mortgage and a standard mortgage?

A land mortgage (mutuo fondiario) is a specific type of standard mortgage (mutuo ipotecario) with financing limits (80% of property value) and a minimum term of 18 months. It enjoys tax advantages (0.25% substitute tax) and procedural benefits. Most primary residence purchase mortgages are land mortgages.