Use our comprehensive Mortgage Calculator to accurately estimate your monthly loan payments, total interest paid, and amortization schedule based on the principal amount, interest rate, and loan term.
Mortgage Calculator
Total Interest:
Mortgage Calculator Formula
The standard formula used to calculate the monthly payment (M) of a fixed-rate mortgage is derived from the present value of an annuity formula. It ensures the loan is fully amortized by the end of the term.
Where $M$ is the Monthly Payment, $P$ is the Principal Loan Amount, $i$ is the Monthly Interest Rate, and $n$ is the Total Number of Payments.
Formula Source: Investopedia – Calculating Payments, Khan Academy – Mortgage Math
Variables Explained
Understanding the inputs ensures you get the most accurate result:
- Principal Loan Amount ($): The total amount of money you are borrowing. This excludes any down payment.
- Annual Interest Rate (%): The yearly interest rate charged by the lender. The calculator converts this to a monthly rate.
- Loan Term (Years): The duration over which the loan will be repaid, typically 15 or 30 years. This is converted into total number of payments (months).
Related Calculators
Explore these related financial tools to assist with your planning:
- Amortization Schedule Calculator
- Refinance Savings Calculator
- HELOC Payment Estimator
- Debt-to-Income Ratio Tool
What is a Mortgage Calculator?
A mortgage calculator is an essential digital tool designed to help prospective and current homeowners estimate the financial implications of a home loan. By inputting key variables like the principal amount, interest rate, and loan term, the calculator uses the standard amortization formula to determine the fixed monthly payment required to fully repay the loan over the specified period.
Beyond the simple monthly payment, advanced mortgage calculators often reveal the total amount of interest that will be paid over the life of the loan. This insight is crucial for comparing different loan offers (e.g., 15-year vs. 30-year mortgages) and making informed decisions about long-term financial commitments. It serves as a starting point for budgeting and understanding the true cost of homeownership.
While the calculator provides estimates, it’s important to remember that actual payments may include escrow items like property taxes and homeowner’s insurance. Always consult with a licensed mortgage professional for final figures.
How to Calculate Your Mortgage Payment (Example)
Let’s follow the steps to calculate the monthly payment for a $200,000 loan at a 4.5% annual rate over 30 years.
- Identify Variables: Principal ($P$) = $200,000. Annual Rate ($R$) = 4.5%. Years ($Y$) = 30.
- Determine Monthly Rate ($i$): Divide the annual rate by 12 and 100: $i = (4.5 / 100) / 12 = 0.00375$.
- Calculate Total Payments ($n$): Multiply the loan term by 12: $n = 30 \times 12 = 360$ payments.
- Apply the Formula: Substitute these values into the formula: $$ M = 200,000 \left[ \frac{0.00375(1+0.00375)^{360}}{(1+0.00375)^{360} – 1} \right] $$
- Result: After calculation, the monthly payment $M$ (excluding taxes and insurance) is approximately $1,013.37$.
Frequently Asked Questions (FAQ)
- Does the monthly payment include property tax and insurance?
- No, the result from this specific calculator only determines the principal and interest portion of your payment. It does not include escrow items like property taxes, homeowners insurance, or HOA fees.
- What is amortization?
- Amortization refers to the process of paying off a debt over time in fixed installments. In a mortgage, the early payments consist mostly of interest, while later payments consist mostly of principal.
- How does adding extra principal affect the calculation?
- Making extra principal payments reduces the loan balance faster, which in turn reduces the amount of interest accrued over the life of the loan. While this calculator estimates the initial required payment, extra payments can significantly shorten the term.
- Is the interest rate quoted annual or monthly?
- The Annual Interest Rate input is the nominal annual rate. The calculator internally converts this into the equivalent monthly interest rate for the calculation.