Calculate Home Mortgage

Expert Financial Reviewer:

This calculator logic is verified and approved by David Chen, CFA (Chartered Financial Analyst).

Use this comprehensive mortgage calculator to estimate your monthly payments, total interest paid, and amortization schedule based on the principal loan amount, interest rate, and term.

Loan Amount ($)

Annual Interest Rate (%)

Loan Term (Years)

ESTIMATED MONTHLY PAYMENT

$0.00

Total Interest Paid: $0.00

Detailed Calculation Steps

Enter valid inputs and click ‘Calculate’ to see the detailed steps here.

Mortgage Payment Formula

$$M = P \frac{i (1 + i)^N}{(1 + i)^N – 1}$$
Where:

$ M $ = Monthly Payment
$ P $ = Principal Loan Amount
$ i $ = Monthly Interest Rate (Annual Rate / 1200)
$ N $ = Total Number of Payments (Loan Term in Years * 12)

Formula Source: Investopedia | Educational Reference: Khan Academy

Key Variables Explained

Understanding the inputs is crucial for accurate results:

Loan Amount (Principal): The total amount you are borrowing from the lender. This is typically the house price minus your down payment.
Annual Interest Rate (%): The yearly rate charged by the lender for the use of the borrowed money. The monthly rate is derived from this.
Loan Term (Years): The duration over which you will repay the loan. Common terms are 15, 20, and 30 years.

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What is a Home Mortgage Calculator?

A Home Mortgage Calculator is an essential financial tool designed to provide borrowers with an accurate estimation of their future monthly loan obligations. By inputting key variables like the loan’s principal, the annual interest rate, and the repayment term, the calculator uses the standard amortization formula to determine the fixed payment amount required each month.

This tool is not just for calculating the monthly payment; it also reveals the total amount of interest that will be paid over the life of the loan. This insight allows prospective homeowners to compare different loan scenarios (e.g., 15-year vs. 30-year terms) and understand the true cost of borrowing, which is vital for making informed and responsible financial decisions regarding homeownership.

How to Calculate Your Mortgage Payment (Example)

Let’s use an example: a $300,000 loan, 6% annual rate, over 30 years.

Determine Variables: Principal ($P$) = $300,000. Annual Rate ($r$) = 6% (or 0.06). Term ($n$) = 30 years.
Calculate Monthly Rate ($i$): $i = 0.06 / 12 = 0.005$.
Calculate Total Payments ($N$): $N = 30 \times 12 = 360$ months.
Solve the Formula: Substitute the values into the amortization formula. $M = 300,000 \times [0.005(1+0.005)^{360}] / [(1+0.005)^{360} – 1]$.
Result: The resulting monthly payment ($M$) is $1,798.65.

Frequently Asked Questions (FAQ)

How does the down payment affect the monthly payment?

The down payment directly reduces the Loan Amount (Principal, $P$). A larger down payment means you borrow less, which significantly lowers both your monthly payment and the total interest paid over the loan term.

Is the calculated payment guaranteed to be my exact final payment?

No. This calculation provides the principal and interest (P&I) portion. Your total monthly payment often includes escrowed amounts for property taxes, homeowner’s insurance, and sometimes Private Mortgage Insurance (PMI), which are not included here.

What is the difference between a 15-year and a 30-year term?

A 15-year term results in a higher monthly payment but a much lower total interest paid over the life of the loan. A 30-year term offers lower monthly payments but results in substantially more interest paid overall.

Can I use this calculator for an adjustable-rate mortgage (ARM)?

This calculator is best suited for fixed-rate mortgages (FRMs). For an ARM, you can only use it to calculate the payment during the initial fixed-rate period before the rate adjusts.