Financial Analyst & Mortgage Specialist
Use this basic mortgage calculator to quickly estimate your monthly principal and interest payment based on the loan amount, annual interest rate, and term length.
Basic Mortgage Calculator
Estimated Monthly Payment:
basic mortgage calculator Formula
The standard formula used for calculating the fixed monthly mortgage payment is based on an amortization schedule:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Formula Source: Investopedia, Bankrate
Variables
- M: Monthly Payment (The amount you pay each month).
- P: Principal Loan Amount (The initial amount borrowed).
- i: Monthly Interest Rate (Annual Rate divided by 12 and 100).
- n: Number of Payments (Loan Term in years multiplied by 12).
Related Calculators
Explore other financial tools to help manage your home loan:
- Mortgage Amortization Schedule Calculator
- Mortgage Refinance Calculator
- Closing Costs Calculator
- Home Equity Line of Credit (HELOC) Calculator
What is basic mortgage calculator?
A basic mortgage calculator is a crucial online tool that determines the periodic payments required to repay a loan based on the principal amount, interest rate, and the duration of the loan. It specifically calculates the principal and interest portion of your monthly payment, excluding other costs like property taxes, homeowner’s insurance, and private mortgage insurance (PMI).
Understanding this monthly payment is the first step in budgeting for a home purchase. By inputting different variables, users can see how slight changes in the interest rate or loan term can significantly impact their long-term financial commitments and overall interest paid.
How to Calculate basic mortgage calculator (Example)
Example: Calculating the monthly payment for a $200,000 loan, 30 years, 5% annual rate.
- Convert Annual Rate to Monthly Rate (i): Divide the annual rate by 12 and 100. (5% / 12 / 100 = 0.0041667).
- Calculate Total Payments (n): Multiply the loan term by 12. (30 years * 12 = 360 payments).
- Plug Values into Formula: $M = \$200,000 \times [ 0.0041667 \times (1 + 0.0041667)^{360} ] / [ (1 + 0.0041667)^{360} – 1 ]$.
- Solve for M: The resulting monthly payment, $M$, is approximately $1,073.64.
Frequently Asked Questions (FAQ)
A: No. This is a basic calculator designed only to estimate the principal and interest (P&I) portion of your payment. Taxes and insurance are separate costs that make up your final escrow payment.
Q: Should I choose a 15-year or 30-year term?A: A 15-year term typically offers a lower interest rate and allows you to save significantly on total interest paid, but results in a higher monthly payment. A 30-year term provides lower monthly payments but costs more over the life of the loan.
Q: How does the interest rate affect my monthly payment?A: The interest rate is the most volatile factor. Even a half-percent change can shift your monthly payment by dozens or hundreds of dollars, demonstrating the value of shopping for the best rate.
Q: What is amortization?A: Amortization is the process of gradually paying off a debt over a fixed period. Early mortgage payments consist mostly of interest, while later payments allocate significantly more to the principal balance.