Use this tool to quickly estimate your monthly mortgage payment based on the loan principal, annual interest rate, and loan term in years.
Mortgage Payment Calculator
Estimated Monthly Payment
Detailed Calculation Breakdown
Enter the required values and click ‘Calculate’ to see the detailed steps.
Mortgage Payment Formula
The standard formula for calculating the fixed monthly mortgage payment (M) is:
$$M = P \frac{r'(1 + r’)^n}{(1 + r’)^n – 1}$$- P = Principal loan amount
- r’ = Monthly interest rate (Annual Rate / 12)
- n = Total number of payments (Loan Term in Years × 12)
Formula Source: Investopedia, Bankrate
Variables Explained
- Loan Principal Amount: The total amount of money borrowed from the lender. This does not include any down payment made.
- Annual Interest Rate (%): The yearly rate charged by the lender for the loan, expressed as a percentage.
- Loan Term (Years): The duration over which the loan is scheduled to be repaid (e.g., 15 years, 30 years).
- Monthly Payment: The fixed amount paid every month, which includes both the principal repayment and the interest due.
Related Calculators
What is a Mortgage Payment Calculator?
A mortgage payment calculator is a critical financial tool used to estimate the monthly cost of owning a home. It takes into account the three primary factors of a mortgage loan—the principal amount borrowed, the annual interest rate, and the loan term—to determine the constant monthly payment required to pay off the debt over time.
Understanding your monthly payment is essential for effective budgeting and assessing home affordability. The calculator simplifies a complex actuarial formula, providing potential homeowners with a clear financial projection before committing to a loan.
How to Calculate Mortgage Payment (Example)
- Gather the variables: Assume a Principal (P) of $250,000, an Annual Rate (r) of 4.5%, and a Term (n_years) of 30 years.
- Calculate the monthly rate (r’): Divide the annual rate by 12 and convert it to a decimal: $4.5\% / 12 = 0.375\% = 0.00375$.
- Calculate the total number of payments (n): Multiply the term by 12: $30 \text{ years} \times 12 = 360 \text{ payments}$.
- Apply the formula: Substitute the values into the monthly payment formula: $$M = \$250,000 \times \frac{0.00375 (1 + 0.00375)^{360}}{(1 + 0.00375)^{360} – 1}$$
- Solve for M: The resulting monthly payment (M) is approximately $1,266.71.
Frequently Asked Questions (FAQ)
No, this calculation only provides the principal and interest (P&I) portion of your payment. It does not include property taxes, homeowner’s insurance (PMI), or homeowner association (HOA) fees, which are often bundled into your actual escrowed payment.
Amortization is the process of gradually paying off a debt over a set period. In the context of a mortgage, the initial monthly payments are heavily weighted toward interest, and as the loan matures, more of the payment is applied toward the principal.
A shorter loan term (e.g., 15 years) results in a higher monthly payment but significantly less total interest paid over the life of the loan. A longer term (e.g., 30 years) results in a lower monthly payment but a much higher total interest cost.
This calculator is designed to solve for the monthly payment. To determine the maximum principal you can afford, you would typically need to work backward using a target monthly payment, or use a specific affordability calculator.