Enter your home price, down payment, loan term, and interest rate into the calculator to determine your monthly mortgage payment.
Mortgage Calculation Formula
The following formula is used to calculate the monthly mortgage payment:
Monthly Payment = (Principal * r) / (1 - (1 + r)^-n)
Variables:
- Principal is the loan amount after the down payment ($)
- r is the monthly interest rate (annual rate / 12 / 100)
- n is the number of monthly payments (loan term * 12)
To calculate the monthly mortgage payment, multiply the principal by the monthly interest rate, then divide by 1 minus the result of raising 1 plus the monthly interest rate to the power of negative the number of monthly payments.
What is Mortgage Calculation?
Mortgage calculation refers to the process of determining your monthly mortgage payment based on the loan amount, interest rate, and loan term. This involves understanding your principal, the applicable interest rate, and the duration of your loan. Proper mortgage calculation helps in accurate financial planning and budgeting.
How to Calculate Monthly Mortgage Payments?
The following steps outline how to calculate the monthly mortgage payments using the given formula:
- First, determine your principal based on the home price and down payment.
- Next, determine the annual interest rate and loan term.
- Convert the annual interest rate to a monthly rate by dividing by 12 and 100.
- Determine the number of monthly payments by multiplying the loan term by 12.
- Use the formula from above: Monthly Payment = (Principal * r) / (1 – (1 + r)^-n).
- Finally, calculate the monthly payment by plugging in the values.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge:
Home Price = $300,000
Down Payment = $60,000
Loan Term = 30 years
Interest Rate = 3.5%
Using these values, you can calculate the monthly mortgage payment and verify with the calculator provided.
FAQ
1. What is principal?
Principal is the amount of money borrowed for the mortgage after subtracting the down payment from the home price.
2. How is interest rate applied?
The interest rate is applied to the principal amount, which is then divided over the loan term to determine the monthly payments.
3. How often should I use the mortgage calculator?
It’s helpful to use the mortgage calculator whenever you’re considering a new home purchase, refinancing, or if you want to understand the impact of different interest rates or loan terms on your monthly payments.
4. Can this calculator be used for different loan types?
Yes, you can adjust the variables such as home price, down payment, loan term, and interest rate to match different loan scenarios.
5. Is the calculator accurate?
The calculator provides an estimate of your monthly mortgage payment based on the inputs provided. For exact figures, it’s best to consult your mortgage lender.