Mortgage Payment Calculator
Monthly Payment: $0.00
Understanding Your Mortgage Payment
A mortgage is a loan used to purchase real estate, where the property itself serves as collateral for the lender. The monthly mortgage payment is a crucial figure for any prospective homeowner, as it represents a significant recurring expense. This payment typically includes several components, primarily the principal and interest, but can also encompass property taxes, homeowner's insurance, and private mortgage insurance (PMI) if applicable.
The calculator above focuses on the core principal and interest (P&I) portion of your mortgage payment. The formula used is the standard annuity formula for calculating loan payments:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- M = Your total monthly mortgage payment
- P = The principal loan amount (the amount you borrow)
- i = Your monthly interest rate (annual interest rate divided by 12)
- n = The total number of payments over the loan's lifetime (loan term in years multiplied by 12)
Example: Let's say you want to buy a home and take out a mortgage for $300,000. The annual interest rate is 4.5%, and you choose a loan term of 30 years.
- Principal (P) = $300,000
- Annual Interest Rate = 4.5%
- Monthly Interest Rate (i) = 4.5% / 12 = 0.045 / 12 = 0.00375
- Loan Term = 30 years
- Total Number of Payments (n) = 30 years * 12 months/year = 360
Plugging these values into the formula:
M = 300,000 [ 0.00375(1 + 0.00375)^360 ] / [ (1 + 0.00375)^360 – 1]
This calculation would result in a monthly principal and interest payment of approximately $1,520.07.
Important Considerations: Remember that this calculator provides an estimate of the P&I payment only. Your actual total monthly housing expense will likely be higher once you factor in property taxes, homeowner's insurance premiums, and potentially Private Mortgage Insurance (PMI) if your down payment is less than 20%. It's essential to get a Loan Estimate from your lender, which will provide a detailed breakdown of all projected costs associated with your mortgage.