Use our comprehensive Mortgage Calculator to determine your potential monthly loan payments, total interest paid, and visualize the full amortization schedule. Understanding these figures is crucial for effective financial planning and making informed real estate decisions.
Mortgage Calculator
Amortization Schedule (First 12 Payments)
Mortgage Calculator Formula
The standard formula used to calculate the fixed monthly payment (M) on a mortgage loan is based on the amortization method:
M = P [ i (1 + i)^n ] / [ (1 + i)^n – 1 ]
Formula Source: Investopedia, Bankrate
Variables Explained
Here is what each variable in the formula and calculator represents:
- P (Principal): The initial loan amount or the remaining balance owed.
- r (Annual Interest Rate): The yearly rate expressed as a percentage.
- i (Monthly Interest Rate): The annual rate divided by 12 (i.e., r / 1200).
- n (Number of Payments): The total number of monthly payments over the loan term (i.e., Years * 12).
- M (Monthly Payment): The fixed amount paid each month.
Related Calculators
Explore other financial tools for comprehensive planning:
- Refinance Savings Calculator
- Loan Amortization Schedule Tool
- Early Mortgage Payoff Calculator
- Debt-to-Income Ratio Calculator
What is a Mortgage Calculator?
A mortgage calculator is an essential digital tool designed to estimate the monthly payments required to repay a home loan. By inputting key variables like the total loan amount (principal), the annual interest rate, and the loan term in years, the calculator instantly solves for the monthly payment. This helps prospective homeowners budget effectively and compare different loan offers without manual computation.
Beyond just the monthly payment, advanced mortgage calculators, like this one, also break down the payment into its principal and interest components over the lifetime of the loan, often displaying the full amortization schedule. This transparency is crucial for understanding how debt is reduced over time.
How to Calculate Mortgage Payment (Example)
Let’s use an example to illustrate the steps:
- Define Variables: Loan Amount (P) = $250,000, Annual Rate (r) = 5.0%, Term (Years) = 30.
- Calculate Monthly Rate (i): Divide the annual rate by 12 and 100: $5.0 / 1200 = 0.004167$.
- Calculate Total Payments (n): Multiply the term by 12: $30 \times 12 = 360$ payments.
- Apply Formula: Substitute the values into the formula: $M = 250000 \times [ 0.004167 \times (1 + 0.004167)^{360} ] / [ (1 + 0.004167)^{360} – 1 ]$.
- Solve: The resulting monthly payment (M) is approximately $1,342.05.
- Determine Total Interest: Total payments ($1,342.05 \times 360$) minus the principal ($250,000$) equals the total interest paid.
Frequently Asked Questions (FAQ)
Principal is the actual amount of money borrowed. Interest is the cost of borrowing that money. Early in a mortgage, a larger portion of the monthly payment goes toward interest; later on, a larger portion goes toward principal.
No, this calculator provides the P&I (Principal and Interest) payment only. Property taxes, homeowners insurance, and HOA fees (PITI) must be calculated separately and added to get the total housing cost.
If you make extra principal payments, you reduce the loan balance sooner. This shortens the loan term and significantly reduces the total amount of interest paid over the life of the loan.
A 15-year mortgage typically has a lower interest rate and saves tens of thousands in interest, but the monthly payment is significantly higher. A 30-year mortgage offers a lower monthly payment, making it more affordable month-to-month.