Mortgage Loan Payment Calculator
Understanding Your Mortgage Payment
A mortgage is a significant financial commitment, and understanding how your monthly payment is calculated is crucial. This calculator helps you estimate your principal and interest (P&I) payment for a fixed-rate mortgage. The monthly payment is determined by three primary factors: the loan amount, the annual interest rate, and the loan term (the duration of the loan).
How the Calculation Works
The standard formula for calculating the monthly payment (M) of a fixed-rate mortgage is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
- P = Principal loan amount (the total amount borrowed)
- i = Monthly interest rate (annual interest rate divided by 12)
- n = Total number of payments (loan term in years multiplied by 12)
For example, if you borrow $200,000 at an annual interest rate of 5% for 30 years:
- P = $200,000
- Annual interest rate = 5% or 0.05
- Monthly interest rate (i) = 0.05 / 12 = 0.00416667
- Loan term = 30 years
- Total number of payments (n) = 30 * 12 = 360
Plugging these values into the formula would yield the estimated monthly principal and interest payment.
What's Included and What's Not
The payment calculated by this tool typically covers only the Principal and Interest (P&I) portion of your mortgage payment. It does NOT include:
- Property Taxes: Paid to your local government.
- Homeowner's Insurance: Required by your lender to protect against damage.
- Private Mortgage Insurance (PMI): Often required if your down payment is less than 20%.
- Homeowners Association (HOA) Fees: If applicable.
These additional costs are often collected by your lender as part of an "escrow" payment and are added to your P&I to make up your total monthly housing expense.
Why Use This Calculator?
This calculator is a valuable tool for:
- Budgeting: Estimate how much home you can afford based on your desired monthly payment.
- Comparison Shopping: Compare loan offers from different lenders.
- Financial Planning: Understand the long-term cost of a mortgage.
By entering different loan amounts, interest rates, and terms, you can gain a clearer picture of your potential mortgage obligations.