Use this **Home Mortgage Calculator** to estimate your potential monthly mortgage payment, including principal and interest. Quickly assess your affordability and structure your loan.
Home Mortgage Calculator
Estimated Monthly Payment (P&I):
—Calculation Details
Enter valid inputs and click ‘Calculate’ to see the detailed steps.
Home Mortgage Calculator Formula
The standard formula used to calculate the monthly payment (P&I) for a fixed-rate mortgage is:
Where M = Monthly Payment, P = Principal Loan Amount, r = Monthly Interest Rate (Annual Rate / 1200), and n = Total Number of Payments (Term in Years * 12).
Formula Source: Investopedia, CFPB
Variables
Here is a breakdown of the variables required for the calculation:
- Loan Principal ($): The total amount of money borrowed to purchase the home, after deducting the down payment.
- Annual Interest Rate (%): The yearly interest rate applied to the loan. The calculator converts this to a monthly rate.
- Loan Term (Years): The duration over which the loan will be repaid, typically 15 or 30 years.
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What is a Home Mortgage Calculator?
A home mortgage calculator is a vital online tool used by prospective homeowners and financial planners to estimate the cost of a mortgage loan. At its core, it uses the loan principal, interest rate, and term to determine the fixed monthly payment required to fully amortize (pay off) the loan by the end of the term. This payment covers both the interest accrued each month and a portion of the principal balance.
Understanding your potential monthly payment is the first critical step in budgeting for a home purchase. It helps you assess how much house you can truly afford, preventing future financial strain. While this calculator estimates the Principal and Interest (P&I) payment, real-world payments often include escrow for property taxes and homeowner’s insurance (PITI).
How to Calculate Monthly Mortgage Payment (Example)
Let’s use an example to show the calculation process:
- Identify Variables: Assume a loan principal (P) of $200,000, an annual interest rate of 5.0% (R), and a 30-year term (T).
- Calculate Monthly Rate (r): Convert the annual rate to a monthly decimal: $r = (5.0 / 100) / 12 = 0.0041667$.
- Calculate Total Payments (n): Multiply the term by 12: $n = 30 \times 12 = 360$ payments.
- Apply Formula: Substitute these values into the formula $M = P \times \frac{r(1 + r)^n}{(1 + r)^n – 1}$.
- The Result: The resulting monthly payment (P&I) is approximately $1,073.64$.
Frequently Asked Questions (FAQ)
- Does this calculator include property taxes and insurance?
- No. This calculator estimates the Principal and Interest (P&I) portion only. In a real scenario, you must factor in Property Taxes (T) and Insurance (I) to get the full PITI payment.
- How does the loan term affect my monthly payment?
- A longer term (e.g., 30 years) results in a lower monthly payment but you pay significantly more total interest over the life of the loan. A shorter term (e.g., 15 years) has a higher monthly payment but saves you tens of thousands in interest.
- What is amortization?
- Amortization is the process of gradually paying off a debt over time. In the early years of a mortgage, a larger portion of your monthly payment goes toward interest. As the balance decreases, more goes toward the principal.
- Should I put down 20%?
- A 20% down payment is generally recommended because it allows you to avoid Private Mortgage Insurance (PMI), which is an extra monthly fee, and it reduces the overall loan principal.