Use our House Mortgage Calculator to quickly estimate your monthly loan payments, total interest paid, and the full cost of borrowing. Simply enter your loan principal, interest rate, and term to get an instant, detailed breakdown.
House Mortgage Calculator
House Mortgage Calculator Formula
The standard formula used to calculate the monthly payment (M) on a fully amortizing loan is:
Formula Source: Investopedia – Mortgage Payment Calculation, Consumer Financial Protection Bureau
Variables Explained
The following variables are used in the calculation:
- M: Monthly Payment (The amount you pay each month).
- P: Loan Principal (The initial amount borrowed).
- i: Monthly Interest Rate (The annual rate divided by 12).
- n: Total Number of Payments (The loan term in years multiplied by 12).
What is a Mortgage Calculator?
A mortgage calculator is an essential financial tool that uses the loan’s principal amount, interest rate, and term to determine the required monthly payment. It models the amortization process, showing how the payment is divided between paying down the principal balance and covering the interest expense.
Understanding your monthly payment is crucial for budgeting and determining housing affordability. The calculator also provides an estimate of the total interest you will pay over the full duration of the loan, allowing for better long-term financial planning and comparison of different loan options.
How to Calculate a Monthly Mortgage Payment (Example)
To calculate the monthly payment for a $200,000 loan at 5% annual interest over 30 years:
- Determine the Monthly Interest Rate (i): Divide the Annual Interest Rate by 12 and 100. (5% / 100) / 12 = 0.004167.
- Determine the Total Number of Payments (n): Multiply the loan term in years by 12. 30 years * 12 months/year = 360 payments.
- Plug Values into the Formula: $$ M = 200,000 \frac{0.004167(1+0.004167)^{360}}{(1+0.004167)^{360} – 1} $$
- Solve for M: The result is approximately $1,073.64 per month.
Frequently Asked Questions (FAQ)
Is the monthly payment calculated here my final payment?
No. This calculation provides the principal and interest portion of your payment. It does not include escrow items like property taxes, homeowner’s insurance, or mortgage insurance (PMI), which will increase your actual payment.
What is amortization?
Amortization is the process of paying off debt over time in regular installments. Early in a mortgage, a larger portion of your payment goes toward interest. Later, a larger portion goes toward reducing the principal.
Does a longer loan term mean I pay more interest?
Yes. While a longer term (e.g., 30 years vs. 15 years) results in a lower monthly payment, you end up paying significantly more total interest over the life of the loan because the principal is outstanding for a longer period.
What is PMI?
PMI stands for Private Mortgage Insurance. It is typically required if you make a down payment of less than 20% of the home’s purchase price. It protects the lender, not the borrower, in case of default.