This financial calculator and supporting educational content are verified for accuracy and compliance with standard amortization methods.
Use this tool to get a precise estimate of your monthly mortgage payment (P&I) based on the principal loan amount, annual interest rate, and the loan term in years. Knowing your estimated payment is a vital first step in home financing planning.
Mortgage Estimate Calculator
Mortgage Estimate Calculator Formula
The standard formula used for calculating the fixed monthly payment ($M$) required to amortize a loan is:
M = P [ i (1 + i)^n ] / [ (1 + i)^n - 1 ]
Where:
- $M$ = Monthly Payment
- $P$ = Principal Loan Amount
- $i$ = Monthly Interest Rate (Annual Rate / 12)
- $n$ = Total Number of Payments (Loan Term in Years × 12)
Variables
Here is an explanation of the inputs used in the calculator:
- Principal Loan Amount: The initial amount of money borrowed (the amount financed), excluding the down payment.
- Annual Interest Rate (%): The yearly cost of borrowing money, expressed as a percentage. This is divided by 12 to find the monthly rate.
- Loan Term (Years): The length of time over which the loan is scheduled to be repaid (e.g., 15 years or 30 years).
- Monthly Payment: The calculated monthly amount of principal and interest (P&I) due to the lender.
Related Calculators
Explore these related financial tools to assist with your overall home buying or investing strategy:
- Refinance Break-Even Calculator
- Home Equity Loan Calculator
- Property Tax Estimator
- Debt-to-Income Ratio Calculator
What is a Mortgage Estimate Calculator?
A Mortgage Estimate Calculator is a crucial tool for anyone considering purchasing a home or refinancing an existing loan. Its primary function is to use the loan’s core parameters (principal, interest rate, and term) to determine the fixed monthly payment required to fully pay off the debt by the end of the term. This payment covers only the principal and interest (P&I) and typically excludes escrow items like property taxes, homeowner’s insurance, and private mortgage insurance (PMI).
The calculator uses an amortization schedule, meaning each monthly payment is applied first to the interest accrued for that month, and the remainder reduces the principal balance. Early in the loan term, payments are heavily weighted toward interest. As the loan matures, a larger portion goes toward the principal, accelerating the debt payoff.
How to Calculate Mortgage Estimate (Example)
Let’s use an example to illustrate the calculation of the monthly payment:
- Define Variables: Suppose you borrow $P = \$200,000$ at an annual rate $R = 5\%$ over a $Y = 30$ year term.
- Calculate Monthly Rate ($i$): $i = R / 12 = 0.05 / 12 = 0.00416667$.
- Calculate Total Payments ($n$): $n = Y \times 12 = 30 \times 12 = 360$.
- Apply the Formula: Substitute these values into the amortization formula: $$ M = 200,000 \times \frac{0.00416667 \times (1 + 0.00416667)^{360}}{(1 + 0.00416667)^{360} – 1} $$
- Determine Result: The resulting fixed monthly payment is approximately $M = \$1,073.64$.
Frequently Asked Questions (FAQ)
A: No. This calculator estimates the Principal and Interest (P&I) portion only. For a full estimated payment, you must separately add your local property tax, homeowner’s insurance, and any potential Private Mortgage Insurance (PMI).
A: Yes. Simply input 15 into the “Loan Term (Years)” field, and the calculator will adjust the total number of payments (n) accordingly.
A: Your monthly payment is fixed, but the *allocation* changes. In the early years, the principal balance is large, so a greater portion of your payment goes to covering the interest, not the principal. This is standard amortization.
A: Making extra principal payments is not accounted for in this basic calculator, but it reduces your outstanding principal balance, leading to less total interest paid and a shorter loan term.