A mortgage is a loan used to purchase real estate, typically a home. The monthly mortgage payment is crucial for homeowners as it represents a significant ongoing financial commitment. This calculator helps you estimate your Principal and Interest (P&I) payment, which is a core component of your total housing expense.
How the Mortgage Payment is Calculated
The standard formula used to calculate the monthly payment for a fixed-rate mortgage is derived from the annuity formula. It accounts for the loan principal, the interest rate, and the loan term. The formula is as follows:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (Principal & Interest)
P = The principal loan amount (the amount you borrow)
i = Your monthly interest rate. This is your annual interest rate divided by 12. (e.g., if your annual rate is 3.5%, your monthly rate 'i' is 0.035 / 12 = 0.00291667)
n = The total number of payments over the loan's lifetime. This is your loan term in years multiplied by 12. (e.g., for a 30-year mortgage, n = 30 * 12 = 360)
Example Calculation
Let's say you are looking to buy a home and have decided on the following:
Loan Amount (P): $300,000
Annual Interest Rate: 3.5%
Loan Term: 30 Years
First, we convert the annual interest rate to a monthly rate (i):
i = 3.5% / 12 = 0.035 / 12 ≈ 0.00291667
Next, we calculate the total number of payments (n):
n = 30 years * 12 months/year = 360 payments
Now, we plug these values into the formula:
M = 300000 [ 0.00291667(1 + 0.00291667)^360 ] / [ (1 + 0.00291667)^360 – 1]
M = 300000 [ 0.00291667 * (1.00291667)^360 ] / [ (1.00291667)^360 – 1]
M = 300000 [ 0.00291667 * 2.8304 ] / [ 2.8304 – 1]
M = 300000 [ 0.008255 ] / [ 1.8304 ]
M = 300000 * 0.0045099
M ≈ $1,352.97
So, the estimated monthly Principal and Interest payment would be approximately $1,352.97.
Important Considerations
The payment calculated by this tool is for Principal and Interest (P&I) only. Your actual total monthly housing expense will likely be higher and may include:
Property Taxes: Annual taxes assessed by your local government, usually paid monthly into an escrow account.
Homeowners Insurance: Coverage for damage to your home, also typically paid into an escrow account.
Private Mortgage Insurance (PMI): Required if your down payment is less than 20% of the home's purchase price.
HOA Fees: If you live in a community with a Homeowners Association.
Always consult with a mortgage lender or financial advisor for a personalized assessment and to understand all costs associated with obtaining a mortgage. This calculator provides an excellent starting point for budgeting and comparing loan offers.
function calculateMortgage() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var interestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
if (isNaN(loanAmount) || isNaN(interestRate) || isNaN(loanTerm) || loanAmount <= 0 || interestRate < 0 || loanTerm 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle case for 0% interest rate
monthlyPayment = loanAmount / numberOfPayments;
}
// Format the currency to two decimal places
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
resultDiv.innerHTML = "Estimated Monthly Payment:$" + formattedMonthlyPayment + "";
}