Use this powerful tool to instantly calculate your potential monthly mortgage payment, total interest paid, and full amortization schedule based on the principal amount, interest rate, and loan term.
Loan Mortgage Calculator
Loan Mortgage Calculator Formula
The standard formula for calculating the fixed monthly mortgage payment (M) is the present value of an annuity formula, solved for M:
$$ M = P \left[ \frac{i(1+i)^n}{(1+i)^n - 1} \right] $$
Where:
M = Monthly Payment
P = Principal Loan Amount (The value solved for by the calculator)
i = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Loan Term in Years * 12)
Formula Source: Investopedia, Bankrate
Variables
The calculator uses four key variables to perform the necessary financial mathematics:
- Loan Amount ($): The principal amount you are borrowing. This is the Present Value (P) in the formula.
- Annual Interest Rate (%): The stated yearly interest rate of the loan (R). This is converted to the monthly rate ($i$).
- Loan Term (Years): The total duration of the loan, typically 15 or 30 years (N). This is converted into total number of months ($n$).
- Monthly Payment ($): The fixed amount paid each month. This is the value (M) that is most often calculated.
Related Calculators
Explore other related financial tools for debt management and planning:
- Debt-to-Income (DTI) Ratio Calculator
- Loan Affordability Calculator
- Bi-weekly Mortgage Payment Tool
- Refinance Break-even Calculator
What is a Loan Mortgage Calculator?
A loan mortgage calculator is a specialized financial tool designed to estimate the cost of a home loan. By inputting the principal loan amount, the annual interest rate, and the loan term, the calculator instantly solves for the fixed monthly payment (Principal + Interest). This allows prospective homeowners to budget effectively and understand the long-term financial implications of borrowing.
Beyond just the monthly payment, most robust calculators (like this one) can also provide an amortization schedule. This schedule details how much of each payment goes toward the principal balance and how much goes toward interest over the life of the loan. Early in the loan term, the majority of the payment services interest, but as time progresses, a greater share goes to reducing the principal.
How to Calculate a Monthly Mortgage Payment (Example)
Let’s use an example with a $200,000 loan, 4% annual interest rate, and a 30-year term:
- Determine Variables: P = $200,000 (Loan Amount) R = 4% (Annual Rate) N = 30 years (Term)
- Calculate Monthly Rate ($i$) and Total Payments ($n$): $i$ = 4% / 12 months / 100 = 0.003333… $n$ = 30 years $\times$ 12 months = 360 payments
- Plug Values into the Formula: $M = 200,000 \left[ \frac{0.003333(1+0.003333)^{360}}{(1+0.003333)^{360} – 1} \right]$
- Solve the Exponent and Numerator/Denominator: $(1+0.003333)^{360} \approx 3.3102$
- Final Calculation: $M = 200,000 \times 0.004774158 = 954.83$
- Result: The estimated monthly payment is $954.83.
Frequently Asked Questions (FAQ)
How much interest will I pay over the life of the loan?
You will pay the Total Payments ($M \times n$) minus the Principal Loan Amount ($P$). For a long-term loan like a 30-year mortgage, the total interest paid often exceeds the original principal amount.
Does this calculator include property taxes and insurance?
No, this calculator only estimates the Principal and Interest (P&I) portion of your payment. Taxes and insurance (T&I) are separate components, often added to create the full escrow payment (PITI). You must calculate those separately.
What is an amortization schedule?
An amortization schedule is a table detailing every payment over the life of the loan. It shows how the monthly payment is split between reducing the principal balance and paying off the accrued interest.
Can I use this to calculate an investment property loan?
Yes, the underlying formula is the same for most amortizing loans. However, interest rates and terms for investment properties are often different than for primary residences, so ensure you use the correct rate.