This calculator is based on standard financial amortization formulas and is regularly reviewed for accuracy.
The ultimate tool for prospective homeowners and refinance seekers. Use the nerdwallet mortgage calculator to quickly estimate your monthly principal and interest payments, helping you budget confidently for your new home.
nerdwallet Mortgage Calculator
nerdwallet Mortgage Calculator Formula
The standard fixed-rate mortgage payment formula is used to determine the equal monthly payment required to fully amortize the loan.
$$M = P \frac{r(1+r)^n}{(1+r)^n - 1}$$
Formula Source: Bankrate, How to Calculate Your Mortgage Payment
Variables Explained
- P (Principal): The initial amount of money borrowed (the loan amount).
- M (Monthly Payment): The amount paid each month for Principal and Interest (P&I).
- R (Annual Interest Rate): The annual rate as a percentage (e.g., 6.5%).
- r (Monthly Interest Rate): The annual rate divided by 1200 ($r = R / 100 / 12$).
- N (Loan Term): The duration of the loan in years (e.g., 30).
- n (Total Payments): The total number of payments in months ($n = N \times 12$).
What is a Mortgage Payment?
A mortgage payment is the regular payment, usually made monthly, by a borrower to a lender. It primarily consists of two parts: the principal and the interest. Principal is the portion that reduces the outstanding loan balance, while interest is the cost of borrowing the money.
While this calculator focuses on the Principal and Interest (P&I) component, a full mortgage payment often includes other elements like property taxes, homeowner’s insurance, and private mortgage insurance (PMI), collectively known as PITI. Understanding your P&I is the first critical step in budgeting for a home purchase.
How to Calculate Monthly Payment (Example)
Let’s calculate the monthly payment for a $300,000 loan at a 6.0% annual interest rate over a 30-year term.
- Determine Loan Variables: Principal (P) = $300,000. Annual Rate (R) = 6.0%. Term (N) = 30 years.
- Calculate Monthly Rate (r): $r = 6.0 / 100 / 12 = 0.005$.
- Calculate Total Payments (n): $n = 30 \times 12 = 360$ months.
- Apply Formula: $$M = 300,000 \times \frac{0.005(1+0.005)^{360}}{(1+0.005)^{360} – 1}$$
- Solve: The resulting monthly payment (P&I) is **$1,798.65**.
Frequently Asked Questions (FAQ)
Is the monthly payment fixed for the entire term?
Yes, for a fixed-rate mortgage, the principal and interest portion (P&I) of the payment remains the same for the entire loan term, regardless of changes in market interest rates. Only the portion allocated to taxes and insurance (if escrowed) may change.
What is amortization?
Amortization is the process of gradually paying off a debt over a fixed period. In a standard mortgage, early payments consist mostly of interest, and later payments consist mostly of principal.
Does this include property taxes or insurance?
No, this calculator only computes the Principal and Interest (P&I) payment. You must factor in property taxes, homeowner’s insurance, and possibly PMI separately to determine your total monthly housing cost (PITI).
Can I pay off my mortgage early?
Yes, making extra principal payments can significantly reduce your total interest paid and shorten the life of the loan. Always check your loan agreement for any prepayment penalties, though these are rare on standard home mortgages.