Calculate Mortgage

DC

Reviewed by: David Chen, CFA

Certified Financial Analyst & Real Estate Consultant

Use this precise and easy-to-use Mortgage Payment Calculator to estimate your monthly mortgage payments, including principal and interest, based on the loan amount, interest rate, and term. Understanding these costs is essential for sound financial planning.

Calculate Mortgage Payment

Your Estimated Monthly Payment:

$0.00

(Principal & Interest)

Detailed Calculation Breakdown:

Mortgage Payment Formula

$$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$$

$M$ = Monthly Payment (Principal & Interest)
$P$ = Principal Loan Amount
$r$ = Monthly Interest Rate (Annual Rate / 1200)
$n$ = Number of Payments (Term in Years × 12)

Formula Source: Investopedia Bankrate

Variables Explained

• Loan Principal ($): The initial amount borrowed. This is the home’s price minus any down payment.
• Annual Interest Rate (%): The yearly cost of borrowing money, expressed as a percentage. The calculator converts this to a monthly rate.
• Loan Term (Years): The duration over which the loan is scheduled to be repaid (e.g., 15 years, 30 years).

Related Calculators

Explore these related financial tools to continue your planning:

• Debt-to-Income Ratio Calculator
• Amortization Schedule Estimator
• Bi-Weekly Payment Savings Calculator
• Home Equity Line of Credit (HELOC) Payment Estimator

What is a Mortgage?

A mortgage is a loan used to purchase or maintain a home, land, or other real estate. The borrower agrees to pay the lender over a set period of time, typically 15 to 30 years, in regular installments. The property itself serves as collateral for the loan.

Each monthly mortgage payment is comprised of two main parts: the principal (the amount you actually borrowed) and the interest (the cost of borrowing the money). Early in the loan term, the interest portion is much larger, while later in the term, more of your payment goes towards reducing the principal amount. This gradual process is known as amortization.

How to Calculate Your Mortgage Payment (Example)

Let’s use an example to demonstrate the steps:

1. Identify Variables: Assume a Principal ($P$) of $250,000, an Annual Rate ($R$) of 5.0%, and a Term ($T$) of 30 years.
2. Calculate Monthly Rate ($r$): Convert the annual percentage rate to a monthly decimal rate: $r = (5.0 / 100) / 12 = 0.004167$.
3. Calculate Total Payments ($n$): Determine the total number of payments: $n = 30 \text{ years} \times 12 \text{ months/year} = 360$.
4. Apply the Formula: Substitute the values into the formula: $M = 250,000 \times \frac{0.004167(1+0.004167)^{360}}{(1+0.004167)^{360} – 1}$.
5. Calculate Result: The resulting monthly payment ($M$) is approximately $1,342.05$.
6. Calculate Total Interest: Total payments ($1,342.05 \times 360$) minus the Principal ($250,000$) equals the total interest paid.

Frequently Asked Questions (FAQ)

How does the down payment affect my monthly payment?

A larger down payment reduces the Loan Principal ($P$). Since the mortgage payment is directly proportional to $P$, a higher down payment results in a lower monthly payment and less interest paid over the life of the loan.

What is amortization?

Amortization is the process of paying off debt over time in regular installments. For a mortgage, an amortization schedule shows how much of each payment goes toward the principal and how much goes toward interest.

Can I calculate property taxes and insurance here?

This calculator focuses only on Principal and Interest (P&I). Property taxes, home insurance, and mortgage insurance (PMI) are often added to the P&I to form the total monthly housing payment (PITI), but those are separate, variable costs.

What is the difference between APR and Interest Rate?

The Interest Rate is the annual cost charged by the lender. The Annual Percentage Rate (APR) is a broader measure of the cost, including the interest rate plus other fees and costs (like origination fees) associated with the transaction, expressed as a yearly percentage.