This calculator utilizes standard amortization formulas consistent with industry practices for calculating periodic mortgage payments.
Welcome to the **Mortgage Payment Calculator**. Quickly estimate your monthly or periodic loan payments, understand the total interest cost, and plan your home ownership budget effectively.
Mortgage Payment Calculator
Your Estimated Periodic Payment:
—Mortgage Payment Calculator Formula
M = Periodic Payment
P = Principal Loan Amount
i = Periodic Interest Rate (Annual Rate / Frequency)
n = Total Number of Payments (Term in Years × Frequency)
Source: Investopedia – Amortization, Bankrate – Mortgage Calculator
Variables Explained
The calculator requires the following variables for an accurate estimation:
- Loan Amount (P): The total principal borrowed. This is the purchase price minus any down payment.
- Annual Interest Rate (r): The yearly rate charged by the lender, expressed as a percentage.
- Loan Term (t): The length of the repayment period in years (e.g., 15, 20, or 30 years).
- Payment Frequency: How often you make a payment, typically monthly (12 times a year).
Related Calculators
- Mortgage Refinance Savings Calculator
- Home Affordability Calculator
- Extra Payment Impact Calculator
- Rent vs. Buy Calculator
What is a Mortgage Payment Calculator?
A mortgage payment calculator is a critical financial tool that helps prospective and current homeowners estimate the size of their periodic mortgage payments. It uses the loan amount, interest rate, and term to apply the standard amortization formula, projecting the exact installment needed to fully repay the debt over the specified term.
Understanding this payment is essential for budget planning. The calculated amount primarily consists of two parts: the principal repayment, which reduces the loan balance, and the interest, which is the cost of borrowing. In the early years of a mortgage, the interest component is significantly higher than the principal component.
By adjusting variables like the interest rate or the loan term, users can quickly see how these changes impact their monthly cash flow, enabling better financial decisions before committing to a long-term loan.
How to Calculate a Mortgage Payment (Example)
Let’s use an example: Principal (P) = $200,000, Annual Rate (r) = 4.0%, Term (t) = 30 Years, Monthly Frequency (F) = 12.
- Determine the Periodic Rate (i): Divide the annual rate by the frequency. $i = 0.04 / 12 = 0.003333$.
- Determine the Total Payments (n): Multiply the term by the frequency. $n = 30 \text{ years} \times 12 \text{ payments/year} = 360$.
- Calculate the Compounding Factor: Compute $(1 + i)^n$. $(1 + 0.003333)^{360} \approx 3.3159$.
- Apply the Amortization Formula: The required factor is $\frac{i \times (1 + i)^n}{(1 + i)^n – 1}$. $\frac{0.003333 \times 3.3159}{3.3159 – 1} \approx 0.004774$.
- Calculate Payment (M): Multiply the principal by the factor. $M = \$200,000 \times 0.004774 = \$954.83$.
Frequently Asked Questions (FAQ)
No. This calculator estimates the principal and interest (P&I) portion of your payment only. Property taxes, homeowners insurance, and mortgage insurance (PMI) must be added separately to determine your total housing expense (PITI).
More frequent payments (like bi-weekly) slightly reduce the total interest paid over the life of the loan, as the principal balance is reduced faster. This calculator adjusts the periodic rate ($i$) and total payments ($n$) based on the frequency you select.
Mortgages are structured so that payments are front-loaded with interest. Since the outstanding principal is highest at the beginning of the loan term, the interest accrued each month is also highest.
Paying extra principal will shorten your loan term and significantly reduce the total interest paid. Use the “Extra Payment Impact Calculator” (listed above) for a precise calculation of these savings.