Use this straightforward mortgage monthly payment calculator to quickly estimate your principal and interest payments, helping you budget and plan for a future home purchase or refinancing.
Mortgage Monthly Payment Calculator
Estimated Monthly Payment
Mortgage Monthly Payment Calculator Formula
The standard formula used to determine a fixed-rate mortgage’s monthly payment is:
Where:
- M = Monthly Payment
- P = Principal Loan Amount
- i = Monthly Interest Rate (Annual Rate / 12 / 100)
- t = Total Number of Payments (Loan Term in Years × 12)
M = P [ i(1 + i)ᵗ / ((1 + i)ᵗ - 1) ]
Formula Source: Investopedia – Mortgage Payment Calculation, NerdWallet – Mortgage Calculation
Variables
Understanding the variables is essential for accurate results:
- Loan Amount (P): The total amount borrowed from the lender. This excludes any down payment.
- Annual Interest Rate (r): The yearly percentage rate charged by the lender before compounding.
- Loan Term (n): The length of the loan, usually expressed in years (e.g., 15, 20, or 30 years).
Related Calculators
What is a Mortgage Monthly Payment Calculator?
A mortgage monthly payment calculator is a simple financial tool that uses the principal loan amount, annual interest rate, and the loan term to estimate the required monthly payment for principal and interest. It utilizes the time value of money concept to calculate how much you need to pay each month to fully amortize the loan by the end of its term.
It’s important to note that the result from this specific calculator typically only covers the principal and interest (P&I). It does not include property taxes, homeowner’s insurance (which together form T&I), or Private Mortgage Insurance (PMI), which are often bundled into your actual total monthly payment. Always account for these extra costs when finalizing your budget.
How to Calculate Mortgage Monthly Payment (Example)
Let’s use an example with a $300,000 loan, 30 years, and a 6.5% interest rate:
- Convert Annual Rate to Monthly Rate (i): Divide the annual percentage rate (6.5%) by 12 (months) and 100 (to convert percentage to decimal): $i = 0.065 / 12 \approx 0.0054167$.
- Calculate Total Number of Payments (t): Multiply the loan term (30 years) by 12: $t = 30 \times 12 = 360$ payments.
- Apply the Monthly Rate to the Exponent: Calculate $(1 + i)^t$, which is $(1 + 0.0054167)^{360} \approx 7.02241$.
- Solve the Numerator Factor: Calculate $i(1 + i)^t$, which is $0.0054167 \times 7.02241 \approx 0.038038$.
- Solve the Denominator Factor: Calculate $(1 + i)^t – 1$, which is $7.02241 – 1 = 6.02241$.
- Calculate the Payment Factor: Divide the numerator factor by the denominator factor: $0.038038 / 6.02241 \approx 0.0063162$.
- Calculate Monthly Payment (M): Multiply the Payment Factor by the Principal Loan Amount ($300,000$): $M = 300,000 \times 0.0063162 \approx \$1,894.86$.
Frequently Asked Questions (FAQ)
What is amortization?
Amortization is the process of paying off debt over time in regular installments. In a mortgage, your monthly payment remains constant, but the portion allocated to interest decreases while the portion allocated to the principal increases over the life of the loan.
Do these payments include property taxes or insurance?
No, the result from this standard calculator only computes the principal and interest (P&I) portion of your payment. Taxes and insurance (T&I) are separate costs that are often collected by the lender and held in an escrow account, adding to your total monthly payment.
How does the loan term affect my payment?
A shorter loan term (e.g., 15 years) results in a higher monthly payment but a significantly lower total interest paid over the life of the loan. A longer term (e.g., 30 years) results in lower monthly payments but much higher total interest costs.
Can I use this calculator for an Adjustable-Rate Mortgage (ARM)?
This calculator is designed for fixed-rate mortgages. While you can use it to estimate the payment during the initial fixed-rate period of an ARM, it will not account for future rate adjustments.