Mortgage Payment Calculator
Calculate your estimated monthly mortgage payment to understand your housing costs better. This calculator helps you estimate principal and interest payments based on the loan amount, interest rate, and loan term.
Estimated Monthly Mortgage Payment (Principal & Interest):
$0.00
Understanding Your Mortgage Payment
A mortgage is a loan used to purchase a home. The monthly payment for a mortgage typically consists of two main components: principal and interest (P&I). This calculator focuses on estimating these two crucial parts of your payment.
Principal:
The principal is the actual amount of money you borrowed to buy your home. Each month, a portion of your payment goes towards reducing this principal balance.
Interest:
Interest is the cost of borrowing money. It's calculated based on the outstanding principal balance and the interest rate. Initially, a larger portion of your payment goes towards interest, and over time, this proportion shifts towards the principal as the balance decreases.
How the Calculation Works:
The monthly mortgage payment (M) is calculated using the following formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- P = Principal loan amount
- i = Monthly interest rate (Annual interest rate / 12)
- n = Total number of payments (Loan term in years * 12)
This formula provides an estimate for the principal and interest portion of your monthly mortgage payment. It does not include other potential costs like property taxes, homeowners insurance, or private mortgage insurance (PMI), which are often included in your total monthly housing expense (escrow).
Example Calculation:
Let's say you want to buy a home and need a mortgage with the following details:
- Loan Amount (P): $300,000
- Annual Interest Rate: 5.5%
- Loan Term: 30 years
First, we convert the annual interest rate to a monthly rate (i):
i = 5.5% / 12 = 0.055 / 12 ≈ 0.00458333
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 = 300,000 [ 0.00458333(1 + 0.00458333)^360 ] / [ (1 + 0.00458333)^360 – 1]
M = 300,000 [ 0.00458333 * (1.00458333)^360 ] / [ (1.00458333)^360 – 1]
M = 300,000 [ 0.00458333 * 4.92697 ] / [ 4.92697 – 1]
M = 300,000 [ 0.022576 ] / [ 3.92697 ]
M = 6772.8 / 3.92697
M ≈ $1,724.40
So, the estimated monthly payment for principal and interest on this mortgage would be approximately $1,724.40.