The **Bankrate Mortgage Calculator** is an essential tool for prospective homeowners and refinance seekers. It quickly determines your monthly mortgage payment based on the loan amount, interest rate, and term, allowing you to accurately budget for your future home expenses.
Mortgage Payment Calculator
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Mortgage Payment Formula
The standard formula used to calculate a fixed monthly mortgage payment is the Annuity Formula:
Formula Source: Investopedia: Mortgage Payment Calculation | The Balance: Calculating Mortgage Payments
Variables Explained
Here is an explanation of the variables used in the calculator:
- Loan Amount (P): The total principal borrowed. This is the initial mortgage amount.
- Annual Interest Rate (R): The yearly rate of interest expressed as a percentage. This is converted to a monthly rate (i) for the calculation.
- Loan Term (T): The total length of time, in years, over which the loan will be repaid. This is converted to the total number of monthly payments (n).
Related Calculators
Explore other financial tools to assist with your home buying journey:
- Home Affordability Calculator
- Mortgage Refinance Savings Calculator
- Extra Mortgage Payment Calculator
- Down Payment Savings Goal Calculator
What is a Mortgage Calculator?
A mortgage calculator is a specialized financial tool designed to estimate the periodic (usually monthly) payments required to fully pay off a loan by the end of its term. It uses the principal loan amount, the annual interest rate, and the loan term to apply the amortization formula and provide an accurate schedule.
Understanding your monthly payment is crucial for managing your personal finances and deciding which home is financially feasible. The Bankrate Mortgage Calculator provides clarity on the breakdown between principal and interest, helping you understand the true cost of borrowing over the life of the loan.
How to Calculate Mortgage Payment (Example)
- Define Variables: Assume a Loan Amount (P) of $200,000, an Annual Rate (R) of 5.0%, and a Loan Term (T) of 30 years.
- Calculate Monthly Rate (i): Divide the annual rate by 12 and 100: $i = 0.05 / 12 = 0.00416667$.
- Calculate Total Payments (n): Multiply the term in years by 12: $n = 30 \text{ years} \times 12 \text{ months} = 360 \text{ payments}$.
- Apply the Formula: Substitute the values into the monthly payment formula to find M.
- Result: In this example, the Monthly Payment (M) is approximately $1,073.64.
Frequently Asked Questions (FAQ)
- How much of my payment goes to principal vs. interest?
- In the early years of a mortgage, a significantly larger portion of your monthly payment goes toward interest. As the loan matures, the portion dedicated to repaying the principal increases, while the interest portion decreases.
- Does this calculator include property taxes and insurance (PITI)?
- No. This calculator only estimates the P&I (Principal and Interest) portion of your payment. It does not include escrow items like property taxes, homeowner’s insurance, or private mortgage insurance (PMI).
- Is a 15-year or 30-year mortgage better?
- A 15-year term typically has a lower interest rate and results in significantly less total interest paid. However, the 30-year term offers a lower monthly payment, providing greater flexibility and cash flow.
- How does down payment affect the monthly payment?
- A larger down payment reduces the Loan Amount (P), which directly reduces the size of the monthly payment (M) and the total interest paid over the life of the loan.