Calculator for Mortgage

Reviewed by David Chen, CFA

A certified financial analyst ensuring the accuracy of all calculation methodologies.

Quickly estimate your potential mortgage payments, total interest costs, and amortization schedule with our professional mortgage calculator tool.

Mortgage Calculator

$0.00

Calculation Details

Enter your loan details and click ‘Calculate’ to see the step-by-step breakdown here.

Mortgage Calculator Formula

M = P [ i (1 + i)ᴺ / ( (1 + i)ᴺ - 1) ]

Formula Source: Investopedia Formula Source: Bankrate

Variables Explained

• M (Monthly Payment): The amount you pay each month, which includes principal and interest.
• P (Principal Loan Amount): The total amount of money borrowed for the mortgage.
• i (Monthly Interest Rate): Calculated by taking the Annual Interest Rate (R), dividing it by 100, and then dividing by 12 ($i = R / 1200$).
• N (Number of Payments): The total number of monthly payments over the loan term ($N = \text{Loan Term in Years} \times 12$).

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What is a Mortgage Calculator?

A mortgage calculator is a crucial financial tool that determines the periodic payments required to repay a loan, given the principal amount, interest rate, and term. It operates using the amortization formula, which ensures that each payment gradually reduces the principal while covering the accrued interest.

For potential homeowners, this calculator provides immediate insight into monthly budget requirements, helping them understand the true cost of borrowing. It is especially useful for comparing different loan scenarios, such as 15-year versus 30-year terms, or the impact of a slightly higher interest rate.

How to Calculate Mortgage Payments (Example)

Let’s use an example: Principal $200,000, Annual Rate 6.0%, Term 30 Years.

1. Convert Annual Rate to Monthly Rate (i): $6.0\% / 1200 = 0.005$.
2. Calculate Total Payments (N): $30 \text{ years} \times 12 = 360$ payments.
3. Calculate Amortization Factor: Compute $(1 + i)^N$. In this case, $(1.005)^{360} \approx 6.022575$.
4. Apply Formula: The required factor is $i \times (1 + i)^N / ((1 + i)^N – 1)$. $0.005 \times 6.022575 / (6.022575 – 1) \approx 0.0059955$.
5. Determine Monthly Payment: Multiply the Principal by the factor. $\$200,000 \times 0.0059955 = \$1,199.10$.

Frequently Asked Questions (FAQ)

How does the loan term affect my payments?

A shorter loan term (e.g., 15 years) results in higher monthly payments but significantly less total interest paid over the life of the loan. A longer term (e.g., 30 years) offers lower monthly payments but costs much more in the long run.

What is the difference between principal and interest?

The principal is the original amount you borrowed. The interest is the fee charged by the lender for borrowing the money. Early mortgage payments consist mostly of interest; over time, the balance shifts to paying mostly principal.

Can this calculator determine affordability?

While it calculates the payment, it doesn’t calculate affordability directly. To estimate affordability, you should use the monthly payment result and compare it against your budget, factoring in taxes, insurance, and other debts (DTI ratio).

Is Private Mortgage Insurance (PMI) included?

No, this basic calculator does not include additional costs like Private Mortgage Insurance (PMI) or escrow payments (property taxes and homeowner’s insurance). The result is the principal and interest portion only.