Use our comprehensive tool to instantly calculate your estimated monthly mortgage payment, total interest paid, and amortization schedule based on the loan principal, annual interest rate, and term.
Mortgage Rates Calculator
Calculation Results
Detailed Calculation Steps
Mortgage Payment Formula
The standard formula for calculating the fixed monthly mortgage payment (M) is:
$$ M = P \frac{r(1+r)^n}{(1+r)^n – 1} $$Where:
- $P$ = Principal Loan Amount
- $r$ = Monthly Interest Rate (Annual Rate / 12)
- $n$ = Total Number of Payments (Loan Term in Years × 12)
Formula Source: Investopedia: Mortgage | Khan Academy: Loan Formulas
Variables Explained
Understanding the inputs is key to using the calculator effectively:
- Loan Amount (Principal, P): The total amount of money you are borrowing. This is typically the purchase price minus your down payment.
- Annual Interest Rate (R): The yearly interest rate expressed as a percentage, which determines the cost of borrowing. The calculator converts this to a monthly rate.
- Loan Term (Years, T): The length of time (in years) over which you agree to repay the loan (e.g., 15 years or 30 years).
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What is a Mortgage Rates Calculator?
A mortgage rates calculator is a financial tool used by potential and current homeowners to estimate their principal and interest (P&I) monthly payment. By inputting the loan amount, the annual interest rate, and the term of the loan, the calculator applies the standard amortization formula to quickly project the monthly financial commitment. This is crucial for budgeting and determining housing affordability.
The calculator also provides critical metrics such as the total amount repaid over the life of the loan and the total interest expense. This total interest figure highlights the true cost of borrowing and allows users to compare different loan scenarios (e.g., comparing a 15-year vs. a 30-year term) to find the most financially sound option for their personal situation.
How to Calculate Mortgage Payments (Example)
Here is a step-by-step example using typical inputs:
- Define Variables: Assume a Loan Amount ($P$) of $250,000, an Annual Interest Rate ($R$) of 6%, and a Loan Term ($T$) of 30 years.
- Calculate Monthly Rate ($r$): Divide the annual rate by 12. ($r$ = 0.06 / 12 = 0.005).
- Calculate Total Payments ($n$): Multiply the term by 12. ($n$ = 30 years * 12 = 360 payments).
- Apply Formula: Plug these values into the monthly payment formula: $$ M = 250,000 \frac{0.005(1+0.005)^{360}}{(1+0.005)^{360} – 1} $$
- Solve for M: The resulting monthly payment ($M$) for Principal and Interest is $1,498.88.
- Find Total Interest: Multiply the monthly payment by the total payments and subtract the principal: ($1,498.88 * 360) – $250,000 = $289,596.80.
Frequently Asked Questions (FAQ)
Below are common questions regarding mortgage rates and payments:
- Is the calculated Monthly Payment the full amount I pay? No. This calculator finds the Principal and Interest (P&I) portion. Your final monthly payment may also include PITI (Principal, Interest, Taxes, and Insurance), which covers property taxes and homeowner’s insurance.
- Why is the Total Interest Paid so high? Mortgage interest is compounded monthly. While your rate may seem low, compounding over 30 years can result in paying more in interest than the original loan amount, especially in the initial years.
- What is the difference between APR and Interest Rate? The Interest Rate is the cost of borrowing. The APR (Annual Percentage Rate) includes the interest rate plus certain other fees and costs (like mortgage points or closing costs) expressed as a yearly rate, offering a more comprehensive measure of the total loan cost.
- Can this calculator determine the best loan for me? It provides the financial figures needed for comparison (payment, total cost), but it cannot assess your personal risk tolerance, creditworthiness, or future income. Consult a financial advisor for personalized advice.