Enter your loan amount, interest rate, and loan term into the calculator to determine your monthly mortgage payments.

Mortgage Calculation Formula

The following formula is used to calculate the monthly mortgage payments. 

Monthly Payment = (Loan Amount * Interest Rate) / (1 - (1 + Interest Rate)^(-Loan Term))

Variables:

  • Monthly Payment is the amount you pay each month ($)
  • Loan Amount is the total amount borrowed ($)
  • Interest Rate is the annual interest rate divided by 12 (%)
  • Loan Term is the duration of the loan in months (years * 12)

To calculate the monthly mortgage payment, multiply the loan amount by the interest rate, then divide by one minus the value of one plus the interest rate raised to the negative loan term.

What is Mortgage Calculation?

Mortgage calculation refers to the process of determining the monthly payments required to repay a loan over a specified period, including interest. This involves understanding the principal loan amount, the interest rate, and the loan term. Proper mortgage calculation ensures accurate budgeting and financial planning for homebuyers.

How to Calculate Monthly Mortgage Payments?

The following steps outline how to calculate the monthly mortgage payments using the given formula.

  1. First, determine your loan amount based on your property value and down payment.
  2. Next, determine the applicable annual interest rate and convert it to a monthly rate by dividing by 12.
  3. Determine the loan term in years and convert it to months by multiplying by 12.
  4. Use the formula from above: Monthly Payment = (Loan Amount * Interest Rate) / (1 – (1 + Interest Rate)^(-Loan Term)).
  5. Finally, calculate the monthly payment by plugging in the values.
  6. 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.

Loan Amount = $200,000

Annual Interest Rate = 3.5%

Loan Term = 30 years

FAQ

1. What is loan amount?

Loan amount is the total amount of money borrowed for purchasing a property, minus the down payment.

2. How is monthly payment different from loan amount?

Monthly payment is the amount paid each month to repay the loan, which includes both the principal and interest portions.

3. How often should I use the mortgage calculator?

It’s helpful to use the mortgage calculator whenever there’s a change in the loan amount, interest rates, or if you want to budget your finances more accurately.

4. Can this calculator be used for different interest rates?

Yes, you can adjust the interest rate field to match the current rate to calculate the monthly payments accordingly.

5. Is the calculator accurate?

The calculator provides an estimate of your monthly mortgage payments based on the inputs provided. For exact figures, it’s best to consult your mortgage documents or financial advisor.