Use our comprehensive **The Mortgage Calculator** to estimate your monthly payments, total interest paid, and amortization schedule. Understanding these figures is the first step toward smart home financing.
The Mortgage Calculator Reviews
Calculation Results
Calculation Steps
Run the calculation to see the detailed steps.
The Mortgage Calculator Formula
The standard formula used to calculate the regular payment (M) on a fixed-rate mortgage is derived from the present value of an annuity formula. We use the following version, assuming monthly compounding for simplicity, which is common in the US:
Variables:
- P = Principal Loan Amount
- r = Monthly Interest Rate (Annual Rate / 12 / 100)
- n = Total Number of Payments (Amortization Years × 12)
- M = Monthly Payment
Formula:
M = P [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]
Formula Source: Investopedia – Mortgage Payment Calculation | Khan Academy – Mortgage Math
Variables Explanation
These are the core variables required for the calculation:
- Loan Principal ($): The initial amount of money borrowed.
- Annual Interest Rate (%): The yearly rate of interest charged by the lender.
- Amortization Period (Years): The total length of time (in years) required to pay off the mortgage loan.
- Payment Frequency: How often you plan to make payments (e.g., monthly, bi-weekly).
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What is The Mortgage Calculator?
A mortgage calculator is an essential tool for prospective and current homeowners. It primarily determines the periodic payment required to fully amortize a loan over a specified term (the amortization period) based on the principal borrowed and the interest rate charged.
Beyond simply providing the payment amount, it helps users visualize the long-term cost of their mortgage, including the total interest paid over the life of the loan. This visibility is crucial for budget planning and making informed decisions about loan terms, such as choosing between a 15-year or a 30-year mortgage.
Financial professionals and review bodies often rely on these tools to quickly vet potential loan scenarios and advise clients on sustainable debt levels, which is why having a verified, accurate calculator is important for any platform offering financial guidance.
How to Calculate The Mortgage Payment (Example)
Let’s calculate the monthly payment for a $300,000 loan at a 6% annual rate over 30 years (monthly compounding and payments):
- Determine Variables: Principal (P) = $300,000. Annual Rate = 6%. Amortization (Years) = 30. Payments per Year = 12.
- Calculate Monthly Rate (r): $r = 0.06 / 12 = 0.005$.
- Calculate Total Payments (n): $n = 30 \times 12 = 360$.
- Apply Formula: Plug the values into $M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]$.
- Intermediate Calculation: $(1 + r)^n = (1.005)^{360} \approx 6.022575$.
- Solve for M: $M = 300,000 \times [ (0.005 \times 6.022575) / (6.022575 – 1) ] \approx \$1,798.65$.
- Result: The required monthly payment is $1,798.65.
Frequently Asked Questions (FAQ)
How does the amortization period affect my payments?
The shorter the amortization period (e.g., 15 years vs. 30 years), the higher your regular payments will be, but the less total interest you will pay over the life of the loan. It significantly reduces the overall cost of borrowing.
What is the difference between bi-weekly and monthly payments?
Monthly payments mean 12 payments per year. Bi-weekly means 26 payments per year. Because a bi-weekly payment is exactly half of a monthly payment, making 26 payments a year results in making an extra full monthly payment annually, which rapidly speeds up the repayment of the principal.
Does this calculator account for property taxes or insurance?
No. This calculator only estimates the principal and interest portion of your mortgage payment (P&I). It does not include Property Taxes, Homeowner’s Insurance, or Private Mortgage Insurance (PMI), which are often collected in escrow by your lender.
What is the standard compounding frequency for mortgages?
In the United States, interest is typically compounded monthly. In Canada, it is legally required to be compounded semi-annually. This calculator assumes monthly compounding (12 times per year) for a simple and common calculation.