Use this fixed interest rate mortgage calculator to estimate your monthly payments, determine the maximum principal you can afford, or calculate the total loan term based on your desired payment amount.
Fixed Interest Rate Mortgage Calculator
Fixed Interest Rate Mortgage Calculator Formula
The standard formula used to calculate the fixed monthly payment (M) for a fixed-rate loan is:
$$ M = P \frac{i(1+i)^t}{(1+i)^t - 1} $$
Where:
- M = Monthly Payment
- P = Loan Principal Amount
- i = Monthly Interest Rate (Annual Rate / 1200)
- t = Total Number of Payments (Loan Term in Years × 12)
Formula Sources:
Investopedia: How to Calculate a Monthly Mortgage Payment | Khan Academy: Loan Amortization FormulasVariables Explained
Here is a detailed explanation of the variables required for the calculator:
- Loan Principal (P): The initial amount of money borrowed for the mortgage.
- Annual Interest Rate (r): The yearly rate charged on the principal, expressed as a percentage.
- Loan Term (n): The total duration over which the loan is scheduled to be repaid, in years (e.g., 15 or 30).
- Monthly Payment (M): The fixed amount paid every month, which covers both principal and interest.
What is a Fixed Interest Rate Mortgage?
A fixed-rate mortgage is a type of home loan where the interest rate remains the same for the entire term of the loan. This provides stability and predictability for the borrower, as their monthly payment (principal and interest portion) will never change, regardless of market fluctuations.
Fixed-rate mortgages are the most common type of home financing in many countries because they eliminate interest rate risk. While the initial rate might be slightly higher than a variable rate mortgage, the certainty of a consistent payment makes budgeting easier for homeowners over the long term.
The predictability of the monthly payment is a major advantage. If you plan to live in your home for many years and prefer stable monthly expenses, a fixed-rate mortgage is usually the recommended choice.
How to Calculate a Fixed Interest Rate Mortgage Payment (Example)
Let’s calculate the monthly payment for a $200,000 loan at a 5% annual rate over 30 years.
- Determine the Monthly Rate ($i$): $5\% / 100 / 12 = 0.0041667$
- Determine the Total Payments ($t$): $30 \text{ years} \times 12 \text{ months/year} = 360$ periods
- Calculate the Amortization Factor $(1+i)^t$: $(1 + 0.0041667)^{360} \approx 4.46774$
- Apply the Formula: $$ M = 200,000 \times \frac{0.0041667 \times 4.46774}{4.46774 – 1} $$ $$ M = 200,000 \times \frac{0.018615}{3.46774} $$ $$ M = 200,000 \times 0.005367 $$
- Final Monthly Payment (M): $M \approx \$1,073.64$
Related Calculators
Explore these related financial tools for further planning:
- Mortgage Refinance Break-Even Calculator
- Bi-Weekly Mortgage Savings Calculator
- Rental Property Cap Rate Calculator
- Simple Loan Interest Calculator
Frequently Asked Questions (FAQ)
Is a fixed-rate mortgage better than an adjustable-rate mortgage (ARM)?
It depends on your situation. A fixed-rate mortgage is better for borrowers seeking stability and protection from rising interest rates. An ARM may offer lower initial payments but carries the risk of rates increasing later in the loan term.
What does ‘fixed’ mean in a fixed interest rate mortgage?
It means the annual interest rate used to calculate your monthly payment remains unchanged for the entire life of the loan (e.g., 30 years). Your principal and interest payment is fixed and predictable.
What is amortization?
Amortization is the process of paying off debt over time in regular installments. For a fixed-rate mortgage, early payments are mostly interest, while later payments consist primarily of principal.
Does a fixed mortgage payment include property taxes and insurance?
Usually, the fixed monthly payment calculated here only includes principal and interest (P&I). However, if you have an escrow account, your lender will collect an additional amount for taxes and insurance (T&I), making your total payment (PITI) higher.