Calculate Mortgage Payments – Loan calculator

Reviewed by: David Chen, CFA

Use our calculator to quickly estimate your monthly mortgage payments. Understanding this cost is the first step in successful homeownership planning.

Calculate Monthly Mortgage Payments

Loan Principal ($)

Please enter a valid principal amount.

Annual Interest Rate (%)

Please enter a valid interest rate.

Loan Term (Years)

Please enter a valid loan term in years.

Estimated Monthly Payment:

$0.00

Detailed Calculation Steps:

Enter your loan details and click Calculate to see the steps.

Mortgage Payment Formula

The standard monthly mortgage payment formula is:


                    $$M = P \left[ \frac{r(1+r)^n}{(1+r)^n - 1} \right]$$
                    

                    Where:
                    

                    M = Monthly Payment
                    

                    P = Principal Loan Amount
                    

                    r = Monthly Interest Rate (Annual Rate / 12)
                    

                    n = Total number of payments (Term in Years × 12)

Formula Sources: Investopedia, Bankrate

Variables Explained

Here is what each input in the calculator represents:

Loan Principal (P): The total amount of money you borrow to buy the home.
Annual Interest Rate (R): The yearly rate charged by the lender, expressed as a percentage (e.g., 6.5%).
Loan Term (Years): The duration over which you will repay the loan, typically 15 or 30 years. This determines the total number of payments (n).

What is a Mortgage Payment?

A mortgage payment is a scheduled payment made by a borrower to a lender during the term of a loan. This payment, often made monthly, is designed to cover two primary components: the principal (the original amount borrowed) and the interest (the cost of borrowing the money).

Early in the loan term, the majority of the monthly payment goes toward interest. As the loan matures, a greater portion of the payment is applied to the principal. This process, known as amortization, is critical for achieving full ownership of the property at the end of the term.

How to Calculate Mortgage Payments (Example)

Let’s use an example with $300,000 principal, 6.00% annual rate, and a 30-year term.

Determine the Monthly Rate ($r$): Convert the annual rate to a decimal and divide by 12: $r = (6.00 / 100) / 12 = 0.005$.
Determine the Total Payments ($n$): Multiply the term in years by 12: $n = 30 \times 12 = 360$.
Calculate the Amortization Factor: Compute the bracketed part of the formula: $\left[ \frac{0.005(1.005)^{360}}{(1.005)^{360} – 1} \right] \approx 0.0059955$.
Calculate the Monthly Payment ($M$): Multiply the principal by the factor: $M = \$300,000 \times 0.0059955 = \$1,798.65$.

Frequently Asked Questions (FAQ)

Q: What is Private Mortgage Insurance (PMI)?: A: PMI is an insurance policy that protects the lender if a borrower defaults on a conventional loan. It’s usually required if your down payment is less than 20% of the home’s purchase price. This calculator does not include PMI.
Q: How does the interest rate affect my payment?: A: The interest rate is the most sensitive variable. A small increase in the rate can significantly raise your monthly payment, as it compounds over the entire term of the loan.
Q: Should I choose a 15-year or 30-year term?: A: A 15-year term typically has a lower interest rate and a higher monthly payment, allowing you to pay less total interest over the life of the loan. A 30-year term offers lower monthly payments but results in paying significantly more interest overall.
Q: Does this calculation include property taxes or insurance?: A: No. This calculator estimates the principal and interest (P&I) portion only. Your total monthly housing payment (often called PITI – Principal, Interest, Taxes, Insurance) will be higher.