Use the most accurate Mortgage Payment Calculator to quickly estimate your monthly principal and interest payments. Understanding this figure is the crucial first step in any home buying or refinancing decision.
Mortgage Payment Calculator
Detailed Calculation Steps
Follow the steps below to see how the result was derived.
Mortgage Payment Formula
The standard formula used for calculating a fixed-rate mortgage payment is based on an annuity formula that determines the present value of future payments.
- M = Monthly Payment
- P = Principal Loan Amount
- i = Periodic (Monthly) Interest Rate (Annual Rate / 12)
- n = Total Number of Payments (Loan Term in Years * 12)
Formula Source: Investopedia – How to Calculate Your Monthly Mortgage Payment
Variables Used in the Calculator
- Principal Loan Amount: The total amount of money you are borrowing from the lender.
- Annual Interest Rate: The nominal interest rate applied to the loan, expressed as a percentage.
- Loan Term (Years): The duration over which the loan will be repaid. This is typically 15 or 30 years.
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What is a Mortgage Payment?
A mortgage payment is the regular payment made by a borrower to a lender for the principal and interest portion of a home loan. When people refer to the “mortgage payment,” they are often referring to PITI (Principal, Interest, Taxes, and Insurance), but this calculator focuses specifically on the Principal and Interest (P&I) component, which is calculated using the formula above.
The P&I payment is structured so that in the early years of the loan, a larger portion of the payment goes toward interest. As the loan matures, a greater percentage is applied to the principal balance, slowly reducing the debt. This concept is formalized in an amortization schedule.
How to Calculate Mortgage Payments (Example)
- Determine the Inputs: Assume a principal ($P$) of $250,000, an annual rate ($R$) of 6.0%, and a term of 30 years.
- Calculate Periodic Rate ($i$): Divide the annual rate by the number of periods (12). $i = 0.06 / 12 = 0.005$.
- Calculate Total Payments ($n$): Multiply the term by 12. $n = 30 \times 12 = 360$ payments.
- Apply the Formula: Substitute these values into the formula to find $M$: $$M = 250000 \left[ \frac{0.005 (1 + 0.005)^{360}}{(1 + 0.005)^{360} – 1} \right]$$
- Solve for M: The resulting monthly payment ($M$) for principal and interest is approximately $1,498.88.
Frequently Asked Questions (FAQ)
Is the calculated amount my final monthly payment?
No. The result from this calculator is the Principal and Interest (P&I) portion. Your final monthly payment (PITI) will also include property taxes, homeowner’s insurance, and sometimes Private Mortgage Insurance (PMI).
What is an Amortization Schedule?
An amortization schedule is a table showing the periodic loan payments, the amount of principal and interest in each payment, and the remaining balance of the loan.
How does a shorter loan term affect my payments?
A shorter loan term (e.g., 15 years instead of 30) generally results in a higher monthly payment, but you pay significantly less total interest over the life of the loan.
What is PMI and when do I need to pay it?
PMI stands for Private Mortgage Insurance. You are usually required to pay it if you put less than 20% down on the home purchase, protecting the lender if you default.