How to Calculate Mortgages

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Mortgage Calculator

Mortgage Payment Calculator

Calculate your estimated monthly mortgage payment.

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Estimated Monthly Payment

$0.00

(Principal & Interest only)

Understanding Your Mortgage Calculation

The monthly mortgage payment is calculated using a standard loan amortization formula. This formula determines the fixed periodic payment required to pay off a loan over a set period, considering both the principal amount borrowed and the interest charged.

The formula for calculating the monthly mortgage payment (M) is:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

Where:

  • P is the principal loan amount (the total amount you borrow).
  • i is your monthly interest rate. This is calculated by dividing your annual interest rate by 12 (e.g., if your annual rate is 6%, your monthly rate i is 0.06 / 12 = 0.005).
  • n is the total number of payments over the loan's lifetime. This is calculated by multiplying the loan term in years by 12 (e.g., for a 30-year mortgage, n is 30 * 12 = 360).

This calculator estimates the Principal and Interest (P&I) portion of your monthly mortgage payment. It does not include other costs such as property taxes, homeowner's insurance, or Private Mortgage Insurance (PMI), which are often paid as part of your total monthly housing expense (sometimes called PITI: Principal, Interest, Taxes, and Insurance).

Example: Let's say you want to buy a home and need a mortgage for $300,000 with an annual interest rate of 5.5% over 30 years.

  • P = $300,000
  • Annual Interest Rate = 5.5%
  • Monthly Interest Rate (i) = 5.5% / 12 = 0.055 / 12 ≈ 0.00458333
  • Loan Term = 30 Years
  • Number of Payments (n) = 30 * 12 = 360
Plugging these values into the formula: M = 300000 [ 0.00458333(1 + 0.00458333)^360 ] / [ (1 + 0.00458333)^360 – 1] M = 300000 [ 0.00458333 * (1.00458333)^360 ] / [ (1.00458333)^360 – 1] M = 300000 [ 0.00458333 * 4.89017 ] / [ 4.89017 – 1] M = 300000 [ 0.022407 ] / [ 3.89017 ] M = 300000 * 0.0057601 M ≈ $1,727.47 Your estimated monthly principal and interest payment would be approximately $1,727.47.

Use this calculator to explore different loan scenarios and understand how interest rates and loan terms can affect your monthly payments.

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