Use our comprehensive free mortgage calculator to instantly determine your estimated monthly payment, total interest paid, or even the maximum loan amount you can afford. This tool is essential for effective home buying and financial planning.
Mortgage Payment Calculator
Mortgage Payment Calculator Formula
The standard fixed-rate mortgage payment formula is based on the amortization schedule, solving for the constant monthly payment that pays off the principal and interest over a fixed term.
Formula Source: Investopedia: How to Calculate a Monthly Mortgage Payment
Variables Used in the Calculator
- P (Principal Loan Amount): The total amount borrowed from the lender.
- R (Annual Interest Rate): The yearly rate charged by the lender, expressed as a percentage.
- T (Loan Term in Years): The length of the loan in years (e.g., 15, 30).
- M (Monthly Payment): The constant monthly amount paid by the borrower.
- i (Monthly Interest Rate): Calculated as $R / 1200$.
- n (Total Number of Payments): Calculated as $T \times 12$.
Related Calculators
Explore these related tools for deeper financial planning:
- Refinance Savings Calculator
- Home Equity Line of Credit (HELOC) Calculator
- Amortization Schedule Generator
- Debt-to-Income Ratio Calculator
What is a Free Mortgage Calculator?
A mortgage calculator is a vital tool that helps prospective and current homeowners understand the financial implications of a mortgage loan. At its core, it applies the mortgage amortization formula to a set of variables—principal amount, interest rate, and term—to project the required monthly payment.
Beyond finding the basic payment (Principal + Interest), a good calculator can help you compare different scenarios, such as the total interest paid over a 15-year versus a 30-year term. It provides transparency into one of the largest financial commitments an individual or family will make, enabling sound budgeting and long-term wealth planning.
How to Calculate a Monthly Mortgage Payment (Example)
Follow these steps to manually calculate a mortgage payment, using $P = \$200,000$, $R = 5\%$, and $T = 30$ years.
- Calculate Monthly Interest Rate (i): Divide the annual rate by 1,200 (since $12$ months and $100\%$): $i = 0.05 / 12 = 0.0041666…$
- Calculate Total Payments (n): Multiply the term in years by 12: $n = 30 \times 12 = 360$ payments.
- Apply the Formula: Substitute the values into the payment formula $M = P \frac{i(1 + i)^n}{(1 + i)^n – 1}$.
- Intermediate Calculation: $(1 + i)^n = (1.0041666…)^{360} \approx 4.46774$.
- Final Calculation: $M = 200,000 \times \frac{0.0041666… \times 4.46774}{4.46774 – 1} \approx \$1,073.64$.
Frequently Asked Questions (FAQ)
The following are common questions regarding mortgage calculations:
What is the difference between principal and interest?
Principal is the initial loan amount you borrowed. Interest is the fee charged by the lender for borrowing that principal. Early mortgage payments consist mostly of interest, while later payments consist mostly of principal.
Does this calculator include property taxes and insurance?
No, this is a P&I (Principal and Interest) calculator only. Property taxes and homeowners insurance (often called “escrow” or PITI) vary widely by location and must be added to the calculated monthly payment for the true total housing cost.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage typically has a lower interest rate and results in significantly less total interest paid, but it requires a much higher monthly payment. A 30-year term offers lower payments, providing more monthly cash flow but costing more overall.
What is amortization?
Amortization is the process of gradually paying off a debt over a fixed period of time through scheduled installments. Each payment reduces both the principal balance and the accrued interest.