Use this powerful and accurate tool to quickly determine your estimated monthly principal and interest payment for any mortgage or loan. Understanding your monthly obligations is the first step toward smart homeownership.
Mortgage Payment Calculator
Mortgage Payment Calculation Formula
The standard formula used to calculate a fixed-rate monthly mortgage payment (Principal and Interest) is:
Formula Sources: Investopedia, Bankrate
Variables Explained
The calculation requires three key variables, which are defined as:
- M: Your calculated Monthly Mortgage Payment (Principal & Interest).
- P: The Principal Loan Amount, or the total amount borrowed.
- r: The Monthly Interest Rate, calculated by dividing the Annual Rate by 12 and 100 (e.g., 5% becomes 0.05/12).
- n: The total number of payments, calculated by multiplying the Loan Term (Years) by 12.
Related Financial Calculators
You may also find these related financial tools useful for your home buying journey:
- Home Equity Calculator
- Debt-to-Income (DTI) Ratio Tool
- Closing Cost Estimator
- Refinance Savings Calculator
What is Calculating Mortgage Payments?
Calculating mortgage payments involves determining the fixed, periodic amount you must pay the lender to fully repay your loan over a predetermined period (the term). The monthly payment is specifically designed to cover both the interest accrued on the remaining principal balance and a portion of the principal itself, ensuring the loan reaches a zero balance by the end of the term.
This process relies on the amortization schedule, which dictates that in the early years, a larger portion of your monthly payment goes toward interest, and as the principal balance decreases, a greater percentage shifts toward paying down the principal.
How to Calculate Mortgage Payments (Example)
Here is a step-by-step example using the following inputs: $300,000 Loan, 5.0% Annual Rate, 30-Year Term.
- Determine the Total Number of Payments (n): Since payments are monthly, multiply the term in years by 12. $n = 30 \text{ years} \times 12 \text{ months} = 360$ payments.
- Calculate the Monthly Interest Rate (r): Convert the annual rate to a decimal and divide by 12. $r = 5.0\% / 100 / 12 = 0.00416667$.
- Solve the Exponent Term (1+r)ⁿ: Calculate the monthly rate raised to the power of the total payments. $(1.00416667)^{360} \approx 4.46774$.
- Calculate the Numerator: Multiply the monthly rate by the exponent term. Numerator $\approx 0.00416667 \times 4.46774 \approx 0.0186156$.
- Calculate the Denominator: Subtract 1 from the exponent term. Denominator $\approx 4.46774 – 1 \approx 3.46774$.
- Determine the Multiplier: Divide the Numerator by the Denominator. Multiplier $\approx 0.0186156 / 3.46774 \approx 0.005368$.
- Calculate the Final Monthly Payment (M): Multiply the Principal Loan Amount by the Multiplier. $M = \$300,000 \times 0.005368 \approx \$1,610.46$.
Frequently Asked Questions (FAQ)
The calculation performed here covers the Principal and Interest (P&I) portions only. Your total monthly payment often includes Escrow (Taxes and Insurance), making the final payment higher. This calculator shows the P&I base amount.
No, this calculator is designed for fixed-rate mortgages where the interest rate remains constant over the life of the loan. ARMs have rates that fluctuate after an initial fixed period, requiring a more complex calculation model.
A shorter loan term (smaller ‘N’) increases your monthly payment because you are paying off the principal over fewer periods. However, it significantly reduces the total amount of interest paid over the life of the loan.
If the interest rate is zero, the payment calculation simplifies to simple division. The monthly payment is simply the Principal Loan Amount divided by the total number of payments (Years x 12). The code handles this edge case specifically.