Use the official Ramsey Mortgage Calculator to quickly estimate your monthly payment, total interest paid, and determine if the mortgage fits within the “Baby Step 6” framework.
Ramsey Mortgage Calculator
Estimated Monthly Payment (P&I)
$0.00
Total Interest Paid: $0.00
Ramsey Mortgage Calculator Formula
The standard fixed-rate mortgage payment formula is used to determine the principal and interest portion (P&I) of your monthly payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
M = Monthly Payment (Principal and Interest)
P = Principal Loan Amount
i = Monthly Interest Rate (Annual Rate / 1200)
n = Total Number of Payments (Loan Term in Years × 12)
Formula Source: CFPB,
Investopedia
Variables Explained
The calculation relies on three main variables you must provide:
- Loan Principal (P): The total amount of money borrowed for the house purchase, excluding any down payment.
- Annual Interest Rate (R): The yearly rate charged by the lender, expressed as a percentage.
- Loan Term (T): The total duration (in years) over which you plan to repay the loan (e.g., 15 years, 30 years).
What is the Ramsey Mortgage Calculator?
This calculator module is designed to align with Dave Ramsey’s “Baby Steps” framework, specifically Baby Step 6, which focuses on paying off the home early. While the calculation itself is standard, the philosophy encourages users to input shorter terms (like 15 years) and confirm that their monthly payment is no more than 25% of their take-home pay, a key Ramsey rule for financial peace.
Understanding the principal and interest payment is the first step in creating a rapid debt payoff strategy. By using a shorter loan term and making extra principal payments (a common Ramsey recommendation), you can significantly reduce the total interest paid over the life of the loan.
How to Calculate Mortgage Payment (Example)
Let’s use an example to see the steps in action:
- Identify Variables: Loan Principal (P) = $200,000; Annual Rate (R) = 6.0%; Term (T) = 30 years.
- Convert to Monthly Rate (i): $i = 6.0 / 1200 = 0.005$.
- Calculate Total Payments (n): $n = 30 \times 12 = 360$ payments.
- Calculate the Payment Factor: $(1 + i)^n = (1.005)^{360} \approx 6.022575$.
- Solve for Monthly Payment (M): $$M = 200,000 \times \frac{0.005 \times 6.022575}{6.022575 – 1} \approx \$1,199.10$$
- Calculate Total Interest: $(\$1,199.10 \times 360) – \$200,000 \approx \$231,676.00$.
Related Calculators
Explore these other financial tools to manage your debt and budget:
- Debt Snowball Calculator
- Net Worth Calculator
- 15-Year vs 30-Year Mortgage Comparison
- Rent vs Buy Calculator
Frequently Asked Questions (FAQ)
- How does a shorter term affect my total interest paid?
- A shorter term, such as a 15-year mortgage, significantly reduces the total interest paid because you are accruing interest over fewer years, even if the monthly payment is higher.
- What is the 25% rule for mortgage payments?
- Dave Ramsey recommends that your monthly PITI (Principal, Interest, Taxes, Insurance) payment should be no more than 25% of your monthly take-home pay. This calculator only estimates P&I.
- Is this calculation for a fixed-rate or adjustable-rate mortgage?
- This calculator uses the fixed-rate amortization formula. It is not accurate for adjustable-rate mortgages (ARMs).
- Why does Ramsey recommend a 15-year fixed-rate mortgage?
- A 15-year fixed-rate mortgage forces you to pay off the house faster, saving massive amounts in interest, and provides certainty against rising rates, which aligns with the core philosophy of financial freedom.