Use this tool to estimate your monthly mortgage payment (Principal and Interest) based on the property price, down payment, interest rate, and loan term.
Estimated Mortgage Payment Calculator
Estimated Mortgage Payment Formula:
$$M = P \left[ \frac{i (1+i)^n}{(1+i)^n – 1} \right]$$
Where:
M = Monthly Payment
P = Principal Loan Amount (Property Price – Down Payment)
i = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Loan Term in Years × 12)
Formula Source: Consumer Financial Protection Bureau Additional Source: Investopedia
Variables:
The calculator uses the following key variables to determine your estimated monthly payment:
- Property Price ($): The full purchase price of the home before any down payment is applied.
- Down Payment ($): The upfront cash amount you are paying. The loan amount (P) is calculated as Price minus Down Payment.
- Annual Interest Rate (%): The annual rate charged on the loan. This is divided by 12 to get the monthly interest rate (i).
- Loan Term (Years): The total length of time (in years) you have to pay back the loan (e.g., 15 or 30 years).
What is Estimated Mortgage Payment?
The Estimated Mortgage Payment calculated here specifically refers to the monthly cost of Principal and Interest (P&I). This is the core component that repays the money borrowed (Principal) and covers the cost of borrowing (Interest) according to the amortization schedule. It is crucial to understand that this estimate does not include other common monthly costs like Property Taxes, Homeowner’s Insurance, or Homeowner’s Association (HOA) dues, which would make up your full monthly housing expense.
The amortization schedule dictates how much of your monthly P&I payment goes toward the principal versus the interest. In the early years of the loan, a larger portion covers interest, and as the loan matures, more of the payment is allocated to reducing the principal balance. This calculator provides an immediate and accurate view of the P&I commitment based on current market rates and terms.
How to Calculate Estimated Mortgage Payment (Example):
Let’s use an example with $300,000 Property Price, $60,000 Down Payment, 6.5% Interest Rate, and a 30-Year Term.
- Determine Principal (P): $300,000 (Price) – $60,000 (Down Payment) = $240,000.
- Determine Monthly Rate (i): Annual Rate (6.5%) / 100 / 12 = 0.005416667.
- Determine Total Payments (n): Term (30 years) * 12 months/year = 360 payments.
- Apply Formula: Plug P, i, and n into the formula: $$M = 240,000 \left[ \frac{0.005416667 (1+0.005416667)^{360}}{(1+0.005416667)^{360} – 1} \right]$$
- Solve for M: The resulting monthly payment (M) is approximately $1,516.85.
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Frequently Asked Questions (FAQ):
A: No. This calculator only estimates the Principal and Interest (P&I) portion of your payment. You must factor in taxes, insurance (PITI), and potential HOA fees for your total monthly housing cost.
Q: What is a good interest rate?A: A ‘good’ interest rate is highly dependent on current economic conditions, the lender, and your personal credit profile (score, debt-to-income ratio). Rates change daily, so it’s best to compare offers from multiple lenders.
Q: How does the loan term affect my monthly payment?A: A shorter term (e.g., 15 years) results in a much higher monthly payment because you are paying off the principal faster, but you pay significantly less total interest over the life of the loan. A longer term (e.g., 30 years) lowers the monthly payment but increases the total interest paid.
Q: What happens if my down payment is less than 20%?A: If your down payment is less than 20% of the property value, you will typically be required to pay Private Mortgage Insurance (PMI), which adds an extra cost to your monthly estimated payment. This calculator does not include PMI.