Use this tool to quickly determine the required monthly payment, the maximum loan principal you can afford, or the total term needed to pay off a mortgage, all based on a monthly payment frequency.
Mortgage Calculator If Paid Monthly
Calculated Result:
$0.00
Mortgage Calculator If Paid Monthly Formula
The standard formula for a fixed-rate mortgage payment is based on the annuity formula. This formula allows you to calculate the monthly payment (M) given the principal amount, interest rate, and term.
Monthly Payment (M) Formula:
$$M = P \left[ \frac{r(1+r)^n}{(1+r)^n - 1} \right]$$
Where:
- $P$ = Principal Loan Amount
- $r$ = Monthly interest rate (Annual Rate / 12)
- $n$ = Total number of months (Loan Term in Years * 12)
Variables Explained
This calculator relies on three core variables to solve for the fourth:
- Loan Principal ($): The initial amount borrowed from the lender.
- Annual Interest Rate (%): The yearly rate charged on the loan balance. It is divided by 12 for the monthly calculation.
- Loan Term (Years): The total duration (in years) over which you agree to repay the loan.
- Monthly Payment ($): The fixed amount paid each month to cover both principal and interest.
What is Mortgage Calculator If Paid Monthly?
A “Mortgage Calculator If Paid Monthly” is an essential financial tool that helps prospective and current homeowners understand the cash flow implications of their home loan. The monthly payment frequency is the standard for nearly all residential mortgages in the US and many other countries, making this calculation highly relevant.
The calculation is based on an amortization schedule, meaning that early payments are heavily skewed towards covering the interest accrued on the remaining balance. As the loan matures, a larger portion of the fixed monthly payment goes toward reducing the principal. This tool helps users perform reverse calculations, such as determining the maximum principal they can afford given a budget for the monthly payment.
How to Calculate Monthly Payment (Example)
Follow these steps to calculate the monthly payment manually:
- Determine Monthly Rate ($r$): Divide the Annual Interest Rate by 12 and convert it to a decimal. (e.g., $6\% / 12 = 0.005$).
- Determine Total Payments ($n$): Multiply the Loan Term in Years by 12. (e.g., $30 \text{ years} \times 12 = 360 \text{ months}$).
- Calculate the Compounding Factor: Compute $(1+r)^n$.
- Apply the Annuity Formula: Plug $P$, $r$, and $n$ into the formula $M = P \left[ \frac{r(1+r)^n}{(1+r)^n – 1} \right]$.
- Result: The final value, $M$, is your fixed monthly payment.
Frequently Asked Questions (FAQ)
Is the monthly payment constant throughout the loan term?
Yes, for a fixed-rate mortgage, the required monthly payment (principal and interest combined) remains the same for the entire loan term. Only the allocation of that payment between principal and interest changes over time.
What is amortization?
Amortization is the process of paying off debt with a fixed repayment schedule in regular installments over time. Each monthly payment includes both interest and a portion of the principal, ensuring the loan balance reaches zero at the end of the term.
Does the calculator include property taxes and insurance?
No, this calculator determines the Principal and Interest (P&I) portion of your payment only. You must add estimated Property Taxes, Homeowner’s Insurance, and Mortgage Insurance (PMI) separately to get the full monthly housing cost (PITI).
Can I use this to calculate the term if I pay extra?
Yes. If you know your principal, rate, and the exact amount of your accelerated monthly payment (M), you can solve for the term (in months, which you can convert to years), showing you how much time you save.