The Mortgages Calculator is an essential tool for estimating your monthly loan payments, total interest paid, and total cost of borrowing. Use it to quickly compare different loan scenarios and plan your budget effectively.
Mortgages Calculator
Calculation Results
Monthly Payment: —
Total Interest Paid: —
Total Repayment: —
Mortgages Calculator Formula
The standard formula used to calculate the fixed monthly payment (M) for an amortizing loan, like a mortgage, is based on the annuity formula.
Formula Sources:
Variables
The calculator uses the following variables, which you enter above:
- Principal Loan Amount ($P$): The initial amount borrowed.
- Annual Interest Rate ($R$): The yearly interest rate, expressed as a percentage.
- Loan Term (Years): The total number of years over which the loan will be repaid.
- Monthly Interest Rate ($r$): Calculated as $R / 12 / 100$.
- Total Payments ($n$): Calculated as Loan Term $\times 12$ (total number of months).
Related Calculators
- Amortization Schedule Calculator
- Refinance Savings Calculator
- Bi-Weekly Payment Calculator
- Home Equity Calculator
What is a Mortgages Calculator?
A mortgages calculator is a financial tool designed to estimate the costs associated with borrowing money to purchase a home. By inputting the principal amount, interest rate, and loan term, it calculates the monthly payment required to fully amortize (pay off) the loan over the defined period.
Understanding your monthly payment is crucial for budgeting and determining housing affordability. The calculator also breaks down the total cost, showing how much money is paid toward interest versus the principal over the life of the loan. This provides a complete financial picture before committing to a long-term debt.
How to Calculate Mortgages Calculator (Example)
Let’s use an example with a $250,000 principal, 6% annual rate, over 30 years.
- Determine Variables: $P = 250,000$, $R = 0.06$ (6%), Term = 30 years.
- Calculate Monthly Rate ($r$): $r = 0.06 / 12 = 0.005$.
- Calculate Total Payments ($n$): $n = 30 \times 12 = 360$.
- Apply Formula: $$M = 250,000 \frac{0.005 (1 + 0.005)^{360}}{(1 + 0.005)^{360} – 1}$$
- Solve for M: $M \approx \$1,498.88$.
- Calculate Total Repayment: $1,498.88 \times 360 = \$539,596.80$.
- Calculate Total Interest: $539,596.80 – 250,000 = \$289,596.80$.
Frequently Asked Questions (FAQ)
Why does the total interest paid look so high?
Mortgages are long-term debts, and interest is calculated on the remaining principal balance. Even small monthly interest rates compound over many years, leading to a large total interest amount. This is why paying extra principal can save significant money.
What is amortization?
Amortization is the process of paying off a debt over time in regular installments. With each payment, a portion goes toward the principal and a portion goes toward interest, with the principal portion increasing over time.
Does the calculator include property taxes or insurance?
No, this calculator determines the principal and interest portion of your monthly payment (P&I) only. It does not account for property taxes, homeowner’s insurance (which form the ‘T’ and ‘I’ in the PITI payment), or private mortgage insurance (PMI).
How accurate is this calculator?
The calculator uses the standard mathematical formula for fixed-rate amortizing loans and is highly accurate. Small variations in final payment amounts may occur in real-world scenarios due to specific closing dates and rounding methods used by lenders.