A mortgage is a significant financial commitment, and understanding how your monthly payment is calculated is crucial. The standard mortgage payment formula, often referred to as the annuity formula, helps determine the fixed monthly payment required to amortize a loan over a set period.
The formula for calculating the monthly mortgage payment (M) is:
$$ M = P \left[ \frac{i(1+i)^n}{(1+i)^n – 1} \right] $$
Where:
M = Your total monthly mortgage payment.
P = The principal loan amount (the amount you borrow). In our calculator, this is the "Loan Amount".
i = Your monthly interest rate. This is calculated by dividing your annual interest rate by 12. For example, if your annual rate is 5%, your monthly rate (i) is 0.05 / 12.
n = The total number of payments over the loan's lifetime. This is calculated by multiplying the loan term in years by 12. For example, a 30-year mortgage has 30 * 12 = 360 payments.
How the Calculator Works:
Our calculator takes the inputs you provide:
Loan Amount (P): The total sum you are borrowing.
Annual Interest Rate (%): The yearly percentage charged by the lender. This is converted to a monthly rate (i) for the calculation.
Loan Term (Years): The duration of the loan, which is converted into the total number of monthly payments (n).
It then plugs these values into the mortgage payment equation to compute:
Monthly Payment (M): The fixed amount you'll pay each month towards principal and interest.
Total Interest Paid: The sum of all interest paid over the life of the loan (Total Repayment – Loan Amount).
Total Repayment: The total amount paid back over the loan's term (Monthly Payment * Number of Payments).
Why Use a Mortgage Calculator?
Budgeting: Helps you understand how much you can afford for a monthly mortgage payment and determine if a particular home is within your budget.
Comparison: Allows you to compare different loan offers with varying interest rates and terms to see which is most cost-effective.
Financial Planning: Aids in long-term financial planning by showing the total cost of borrowing over many years.
Amortization Insight: Provides clarity on how much of your payment goes towards interest versus principal in the early years of the loan.
Remember, this calculator provides an estimate. Actual mortgage payments may include additional costs such as property taxes, homeowner's insurance, and private mortgage insurance (PMI), often referred to as PITI (Principal, Interest, Taxes, Insurance). It's always recommended to consult with a mortgage professional for a precise quote tailored to your situation.
function calculateMortgage() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("annualInterestRate").value);
var loanTermYears = parseFloat(document.getElementById("loanTermYears").value);
var monthlyPaymentText = document.getElementById("monthlyPayment");
var totalInterestText = document.getElementById("totalInterest");
var totalRepaymentText = document.getElementById("totalRepayment");
monthlyPaymentText.textContent = "–";
totalInterestText.textContent = "–";
totalRepaymentText.textContent = "–";
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTermYears) || loanAmount <= 0 || annualInterestRate < 0 || loanTermYears 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle zero interest rate case
monthlyPayment = loanAmount / numberOfPayments;
}
var totalRepayment = monthlyPayment * numberOfPayments;
var totalInterest = totalRepayment – loanAmount;
monthlyPaymentText.textContent = "$" + monthlyPayment.toFixed(2);
totalInterestText.textContent = "Total Interest: $" + totalInterest.toFixed(2);
totalRepaymentText.textContent = "Total Repayment: $" + totalRepayment.toFixed(2);
}