A home loan, also known as a mortgage, is a significant financial commitment. Understanding how your monthly payment is calculated is crucial for budgeting and financial planning. This calculator helps you estimate your principal and interest (P&I) payment based on the loan amount, annual interest rate, and loan term.
The Formula Explained
The standard formula for calculating a fixed-rate mortgage payment (M) is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
P = Principal loan amount (the total amount you borrow).
i = Monthly interest rate. This is your annual interest rate divided by 12. For example, if your annual rate is 5%, your monthly rate is 0.05 / 12.
n = Total number of payments over the loan's lifetime. This is your loan term in years multiplied by 12. For a 30-year loan, n = 30 * 12 = 360.
How This Calculator Works
This calculator takes the values you enter for:
Loan Amount ($): The principal amount you need to borrow for your home.
Annual Interest Rate (%): The yearly interest rate charged by the lender.
Loan Term (Years): The duration of the loan, typically 15 or 30 years.
It then applies the formula above to compute your estimated Monthly Principal & Interest Payment.
Important Considerations:
This calculator provides an estimate of the principal and interest portion of your mortgage payment. Most mortgage payments also include:
Property Taxes: Annual taxes assessed by your local government, usually divided into monthly installments.
Homeowners Insurance: Insurance to protect against damage to your home, also typically paid monthly.
Private Mortgage Insurance (PMI): Required if your down payment is less than 20% of the home's purchase price.
HOA Fees: Dues for homeowners associations in some communities.
Therefore, your actual total monthly housing expense will likely be higher than the amount calculated here. Always consult with your lender for a precise breakdown of all costs associated with your home loan.
Use Cases:
Budgeting: Determine if a potential home purchase fits within your monthly budget.
Affordability: Estimate how much house you can afford based on your desired monthly payment.
Comparison: Compare loan offers from different lenders by plugging in their proposed interest rates and terms.
Financial Planning: Understand the long-term impact of different loan terms on your total repayment amount.
function calculateLoanPayment() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var resultDiv = document.getElementById("result");
// Validate inputs
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTerm) ||
loanAmount <= 0 || annualInterestRate < 0 || loanTerm <= 0) {
resultDiv.innerHTML = "Monthly Payment: Please enter valid numbers.";
return;
}
// Convert annual interest rate to monthly interest rate
var monthlyInterestRate = annualInterestRate / 100 / 12;
// Convert loan term in years to total number of payments
var numberOfPayments = loanTerm * 12;
var monthlyPayment = 0;
// Calculate monthly payment using the formula M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Handle the case where the interest rate is 0% separately to avoid division by zero
if (monthlyInterestRate === 0) {
monthlyPayment = loanAmount / numberOfPayments;
} else {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
// Format the result to two decimal places
var formattedMonthlyPayment = monthlyPayment.toFixed(2);
resultDiv.innerHTML = "Monthly Payment: $" + formattedMonthlyPayment + "";
}