Use this tool to quickly calculate your potential monthly mortgage payment. Dave Ramsey highly recommends a 15-year fixed-rate mortgage. Input your loan details below to see the monthly principal and interest payment you can expect.
Dave Ramsey Mortgage Calculator
Estimated Monthly Payment (P&I)
$0.00
Step-by-Step Calculation
Calculation steps will appear here after calculation.
Dave Ramsey Mortgage Calculator Formula
The standard fixed-rate monthly payment (M) is calculated using the amortization formula:
M = P * [ r * (1 + r)^n ] / [ (1 + r)^n – 1 ]
Where:
P = Principal Loan Amount
r = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Years × 12)
Formula Source: Investopedia – Mortgage Definition
Variables Explained
- Principal Loan Amount (P): The total amount of money borrowed from the lender.
- Annual Interest Rate (R): The yearly cost of the loan, expressed as a percentage. This is divided by 1200 for the monthly rate in the formula.
- Loan Term in Years (N): The scheduled duration over which the loan will be repaid, typically 15 or 30 years.
- Monthly Payment (M): The resulting payment required each month to cover the principal and interest (P&I).
Related Calculators
Explore other tools to help you achieve financial freedom faster:
- Debt Snowball Calculator
- Early Mortgage Payoff Calculator
- Savings Interest Compound Calculator
- Retirement Affordability Estimator
What is a Dave Ramsey Mortgage Calculator?
While this tool uses the universal mortgage amortization formula, it’s often referred to as a “Dave Ramsey Mortgage Calculator” because it focuses on calculating manageable payments within the framework of his financial principles. Ramsey is a strong advocate for **getting out of debt quickly** and advises against 30-year mortgages, instead promoting the **15-year fixed-rate mortgage** as the maximum term.
The primary purpose of this calculation in a Ramsey context is not just to see what you can afford, but to calculate the payment for the shortest term possible (15 years or less) to ensure you are maximizing your wealth-building potential by minimizing interest paid over the life of the loan.
How to Calculate Your Monthly Payment (Example)
- Determine Variables: Assume a Principal Loan Amount (P) of $200,000, an Annual Interest Rate of 6.0%, and a Loan Term of 15 years.
- Calculate Monthly Rate (r): Convert the annual rate to a monthly decimal: 6.0% / 1200 = 0.005.
- Calculate Total Payments (n): Convert the term to months: 15 years × 12 = 180 months.
- Plug into Formula: Calculate $M = 200,000 * [ 0.005 * (1 + 0.005)^{180} ] / [ (1 + 0.005)^{180} – 1 ]$.
- Result: The resulting monthly payment (P&I) is approximately $1,687.71.
Frequently Asked Questions (FAQ)
Should I choose a 15-year or 30-year mortgage?
Dave Ramsey strongly recommends the 15-year fixed-rate mortgage. While the monthly payment is higher, you save tens or even hundreds of thousands of dollars in interest and own your home free and clear in half the time, accelerating your path to financial independence.
Does this calculator include property taxes and insurance (PITI)?
No, this calculator only determines the monthly Principal and Interest (P&I) payment based on the amortization formula. You must add your local property taxes and homeowner’s insurance premiums (T&I) to get your total monthly PITI payment.
What is the maximum house payment I should have?
Ramsey’s rule of thumb is that your total monthly PITI payment should be no more than 25% of your take-home pay on a 15-year fixed-rate mortgage. This is a very conservative and secure ratio.
Can I use this calculator to figure out my early payoff date?
This version is primarily for determining the scheduled payment. To calculate early payoff, you would need an extended amortization calculator that models extra principal payments. However, you can use this payment as a baseline for your budget.