Use this powerful, single-file calculator to accurately determine your potential monthly mortgage payments. Understanding this cost is the critical first step in financial planning, whether you are a first-time homebuyer or refinancing an existing loan.
Mortgage Payment Calculator
Estimated Monthly Payment
Total Interest Paid: $0.00
How to Calculate Mortgage Payments Formula
The standard fixed-rate mortgage payment calculation relies on an amortization formula, which determines the required periodic payment to fully pay off the loan’s principal and interest over a fixed period.
$$M = P \frac{i(1+i)^n}{(1+i)^n - 1}$$
Where:
M = Monthly Payment
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 12)
n = Total Number of Payments (Loan Term in Years × 12)
Formula Sources:
Investopedia,
NerdWallet
Variables in the Mortgage Payment Calculation
Here is a breakdown of the inputs required for the calculator:
- Loan Principal ($): The total amount of money you are borrowing. This is typically the purchase price minus your down payment.
- Annual Interest Rate (%): The yearly rate charged by the lender, expressed as a percentage. This is converted to a monthly rate for the formula.
- Loan Term (Years): The length of time over which you agree to repay the loan, typically 15 or 30 years.
Related Financial Calculators
Explore these other financial tools to assist with your planning:
- Amortization Schedule Calculator
- Debt-to-Income Ratio Calculator
- Loan Affordability Estimator
- Prepayment Savings Calculator
What is a Mortgage Payment?
A mortgage payment is the regular (usually monthly) payment made by a borrower to a lender to repay a home loan. A standard payment is composed of four components, often referred to as PITI: Principal, Interest, Taxes, and Insurance. This calculator focuses primarily on the Principal and Interest (P&I) portion, as taxes and insurance are variable and depend on the property location and specific coverage.
The P&I component is critical because it directly reduces the outstanding loan balance. In the early years of a loan, a larger portion of your payment goes toward interest. As the loan matures, the principal portion increases, accelerating the payoff of your home.
How to Calculate Mortgage Payments (Example)
Let’s use an example with $300,000 principal, 5% annual rate, and a 30-year term.
- Convert Annual Rate to Monthly Rate (i): Divide the annual rate by 12. ($0.05 / 12 = 0.004167).
- Calculate Total Payments (n): Multiply the term in years by 12. ($30 \times 12 = 360$ payments).
- Calculate the Compounding Factor: Compute $(1+i)^n$. $(1 + 0.004167)^{360} \approx 4.4677$.
- Apply to Formula: $$M = 300,000 \times \frac{0.004167 \times 4.4677}{4.4677 – 1} \approx \$1,610.46$$
- The result is the monthly Principal and Interest (P&I) payment.
Frequently Asked Questions (FAQ)
Here are common questions about calculating mortgage payments:
- How do I calculate the total interest paid? You multiply the monthly payment (M) by the total number of payments (n) and subtract the original loan principal (P).
- Does this payment include property taxes and insurance? No, this calculation only includes the Principal and Interest (P&I) portion. Escrow payments for taxes and insurance must be added separately.
- Why is my monthly payment higher in the beginning? The monthly payment is fixed, but the *allocation* changes. In the early stages, most of the payment goes toward paying off the interest accrued on the large principal balance.
- What is the biggest factor affecting my monthly payment? The principal loan amount (P) is the largest determinant, followed closely by the interest rate (r) and the loan term (n).