Use this simple, robust tool to quickly determine your required monthly principal and interest (P&I) payment. Understanding your fixed costs is the first step toward achieving your debt-free goals, as advocated by financial experts like Dave Ramsey.
Dave Ramsey Mortgage Payment Calculator
Estimated Monthly P&I Payment:
—
(Total Interest Paid: —)
Mortgage Payment Formula (P&I)
The standard formula calculates the fixed principal and interest payment for an amortizing loan:
M = P [ i(1 + i)^n / ((1 + i)^n – 1) ]
Variables Explained
These are the core components required for the amortization calculation:
- M: Monthly Payment (The value solved by the calculator).
- P: Principal Loan Amount. The total amount borrowed.
- i: Monthly Interest Rate. The Annual Rate (%) divided by 1200.
- n: Total Number of Payments. The Loan Term (Years) multiplied by 12.
Related Financial Calculators
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Understanding the Dave Ramsey Approach to Mortgages
The Dave Ramsey plan emphasizes paying off consumer debt quickly (like credit cards and car loans) before tackling the mortgage. While he suggests a 15-year fixed-rate mortgage when you are ready to buy, this calculator uses the standard 30-year option to demonstrate the common market scenario. The key is knowing your payment.
Regardless of the term, your largest monthly expense (P&I) is fixed. Use this calculator to see how different interest rates or loan amounts impact your cash flow, ensuring you stay within the 25% of your take-home pay rule for housing.
How to Calculate a Mortgage Payment (Example)
Let’s use an example of a $200,000 loan at 6% annual interest over 30 years:
- Find Monthly Rate (i): Divide the annual rate by 1200: 6 / 1200 = 0.005.
- Find Total Payments (n): Multiply the term by 12: 30 * 12 = 360 payments.
- Apply the Formula: Calculate the monthly payment (M) using $P = 200,000$, $i = 0.005$, and $n = 360$.
- Intermediate Calculation: $(1 + 0.005)^{360} = 6.022575…$
- Final Result: The calculation yields a monthly payment of $1,199.10.
Frequently Asked Questions (FAQ)
A: The 15-year term typically comes with a lower interest rate and ensures you pay far less interest overall, which aligns with the Ramsey philosophy. The 30-year term offers lower monthly payments but results in significantly higher total interest paid over the life of the loan.
Q: Does this calculator include Property Taxes and Insurance (PITI)?A: No. This calculator computes only the Principal and Interest (P&I) portion of your payment. Taxes and insurance (T&I) vary greatly by location and are added by your mortgage servicer, making your final payment PITI.
Q: How does making extra payments affect my loan?A: Extra principal payments directly reduce the principal amount, which is the P variable in the formula. This saves you interest over time and accelerates your payoff date, a key component of the Ramsey debt strategy.
Q: What is the maximum percentage of income I should spend on a mortgage?A: Financial experts often recommend that your total housing payment (PITI) should not exceed 25% of your take-home pay on a 15-year fixed-rate loan.