Use this reliable **mortgage.calculator** to quickly estimate your monthly principal and interest payments. Understanding this figure is essential for budgeting and planning your home purchase.
Mortgage Payment Calculator
Estimated Monthly Payment (P&I):
$0.00Mortgage Payment Formula
The standard formula used to calculate the fixed monthly payment (M) for a fixed-rate mortgage is:
M = P [ r(1 + r)^n / ((1 + r)^n - 1) ]
Where:
- M = Monthly payment
- P = Principal loan amount
- r = Monthly interest rate (Annual Rate / 1200)
- n = Total number of payments (Term in Years × 12)
Formula Source: Bankrate Mortgage Calculation Guide | Investopedia Financial Formulas
Understanding the Input Variables
- Loan Principal ($): The total amount of money borrowed. This is the home’s price minus your down payment.
- Annual Interest Rate (%): The yearly cost of borrowing money, expressed as a percentage. This value is divided by 12 to get the monthly rate for the calculation.
- Loan Term (Years): The duration over which the loan is scheduled to be repaid. Common terms are 15 or 30 years.
What is mortgage.calculator?
A mortgage calculator is a crucial financial planning tool that helps prospective homeowners understand the long-term cost of borrowing. It uses fundamental amortization mathematics to project the consistent monthly payment required to pay off a loan’s principal and interest over a fixed term.
While the calculator primarily provides the Principal and Interest (P&I) portion of the monthly housing expense, it serves as the foundation for budgeting. Homeowners must remember to factor in property taxes, homeowner’s insurance, and, potentially, mortgage insurance (PMI) to arrive at the total monthly housing payment.
Using this calculator early in the home-buying process allows you to determine an affordable price range and compare the financial impact of different interest rates or term lengths (e.g., 15-year vs. 30-year).
How to Calculate Mortgage Payment (Example)
- Determine the Variables: Assume a Principal (P) of $250,000, an Annual Interest Rate (R) of 6.0%, and a Term (T) of 30 years.
- Calculate Monthly Rate (r): Convert the annual rate to a monthly decimal: $r = (6.0 / 100) / 12 = 0.005$.
- Calculate Total Payments (n): Multiply the term by 12: $n = 30 \times 12 = 360$ payments.
- Calculate the Amortization Factor: Use the core formula components: $\frac{r(1+r)^n}{(1+r)^n – 1}$.
- Solve for Monthly Payment (M): Multiply the Principal by the amortization factor. In this example, M would be approximately $1,498.88.
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Frequently Asked Questions (FAQ)
What is PITI?
PITI stands for Principal, Interest, Taxes, and Insurance. While the calculator only calculates P&I, PITI is often used to describe the total monthly housing cost when escrow is included.
Is a 15-year or 30-year term better?
The 15-year term builds equity faster and has a lower total interest cost, but the monthly payment is significantly higher. The 30-year term offers more flexibility with lower monthly payments but costs more in total interest.
How does my down payment affect the calculation?
The down payment directly reduces the Loan Principal (P). A larger down payment means a smaller P, resulting in a lower monthly payment and less total interest paid over the life of the loan.
What is Private Mortgage Insurance (PMI)?
PMI is an insurance premium usually required if your down payment is less than 20% of the home’s purchase price. It protects the lender, not you, and adds to your total monthly payment until your loan-to-value ratio drops below 80%.