### Formula to compute mortgage payments -

## Mortgage Calculator

A mortgage amortization calculator shows how much of your monthly mortgage payment will go toward principal and interest over the life of your loan. The loan calculator also lets you see how much you can save by prepaying some of the principal.

**How to use the loan amortization calculator**

With HSH.com's mortgage payment calculator, you enter the features of your mortgage: amount of the principal loan balance, the interest rate, the home loan term, and the month and year the loan begins.

Your initial display will show you the monthly mortgage payment, total interest paid, breakout of principal and interest, and your mortgage payoff date.

Most of your mortgage loan payment will go toward interest in the early years of the loan, with a growing amount going toward the loan principal as the years go by - until finally almost all of your payment goes toward principal at the end. For instance, in the first year of a 30-year, $250,000 mortgage with a fixed 5% interest rate, $12,416.24 of your payments goes toward interest, and only $3,688.41 goes towards your principal. To see this, click on "Payment chart" and mouse over any year.

Clicking on "Amortization schedule" reveals a display table of the total principal and interest paid in each year of the mortgage and your remaining principal balance at the end of each calendar year. Clicking the "+" sign next to a year reveals a month-by-month breakdown of your costs.

**Calculate**

Click "calculate" to get your monthly payment amount and an amortization schedule.

**The effect of prepayments**

Now use the mortgage payment calculator to see how prepaying some of the principal saves money over time. The calculator allows you to enter a monthly, annual, bi-weekly or one-time amount for additional principal prepayment.To do so, click "+ Prepayment options."

Let's say, for example, you want to pay an extra $50 a month. Using the $250,000 example above, enter "50" in the monthly principal prepayment field, then either hit "tab" or scroll down to click "calculate." Initial results will be displayed under "Payment details," and you can see further details in either the "Payment chart" or "Amortization schedule" tabs.

You may also target a certain loan term or monthly payment by using our mortgage prepayment calculator. Of course you'll want to consult with your financial advisor about whether it's best to prepay your mortgage or put that money toward something else, such as retirement.

HSH.com has developed a host of other free mortgage calculators to help answer your other questions, such as, "Can I qualify for a mortgage," "Will prepaying my mortgage help me save money," "How large of a down payment do I really need," "What’s the best way to pay for my refinance," and "When will my home no longer be underwater?" See all of HSH.com's mortgage calculators.

### Why Use a Mortgage Calculator?

Using a mortgage payment calculator helps you establish a budget before buying a home. Budgeting helps you head off problems and keeps you from getting in over your head financially. If your home purchase will increase your housing costs, for instance, you need to determine where you’ll find the extra money. What expense can you cut to make your home purchase affordable?

A mortgage payment calculator reveals the different components of a prospective mortgage payment. Those include more than just principal and interest. You’ll be paying property taxes and homeowners insurance, and possibly other costs — like private mortgage insurance (PMI) premiums, homeowners association (HOA) dues and flood insurance charges.

However, a simple mortgage calculator does not incorporate all homeownership costs. Maintenance and repairs often surprise first-time buyers. You can estimate potential expenses with one of two formulas: either 1% of the home price per year, or $1 per year for every square foot of space. To make costs more predictable, consider purchasing a home warranty. Additional hidden costs might include higher utility charges, lawn and yard services, higher cleaning costs and new furniture.

### How to Use a Mortgage Calculator

Mortgage calculators help you with many steps of your home purchase and allow you to make informed choices. You can use a mortgage calculator when shopping for or purchasing a home, considering when to pay off your mortgage, and when determining the type and length of home loan to apply for. In general, when using a mortgage calculator, you'll need to know the home price, your downpayment amount and the interest rate. Other factors, like HOA fees and insurance, may help you get the most accurate estimate.

**Determining how much of your home you can afford**: You can play around with different loan amounts (like jumbo loans) and interest rates to see how they translate into a monthly payment. And by clicking the “Affordability” tab, you’ll see if the home is affordable to you based on typical mortgage lender guidelines.**Deciding what type of mortgage to get**: Mortgage programs offer a combination of advantages and drawbacks. A 15-year loan, for instance, has a lower interest rate and much lower total interest costs than a 30-year loan. But the monthly payment is higher and might not be affordable to you.**The total cost/interest of the loan**: Click the “Schedule” tab and move the slider to see how your loan balance falls over the life of the loan. You can see the allocation of your total payments at any point in time and the total costs over the life of the loan.**Paying off a mortgage early**: Under the “Schedule” tab, input one-time, annual or monthly prepayments to see how they reduce your costs and repayment time.

### How to Use the MoneyGeek Mortgage Calculator

To use MoneyGeek's mortgage calculator, you'll need to provide a few simple numbers to determine your home costs. Enter these numbers in the tool above to estimate your overall mortgage costs.

**Home Price**: You can input the maximum home price you’re considering and let the calculator determine the loan amount. Or click “Enter a loan amount instead” to find a loan payment without worrying about the other elements.**Down Payment**: You can enter the down payment as either a dollar amount or a percentage of the purchase price. The calculator uses this amount to set the loan amount.**Interest Rate**: Enter the loan’s interest rate. You can get rates from MoneyGeek’s daily mortgage rates report or obtain quotes from individual mortgage lenders.**Loan Terms**: Select the length of your desired loan from the drop-down list. The most common are 15 and 30 years, but 10- and 20-year loans are also available.**Payments per Year**: Payments per year matters when calculating a loan payment. For monthly payments (most common), the number is 12.**Property Tax**: If you know the tax bill for a specific property, you can input it under “Other fees.” Click the “Annually” link and enter the yearly property tax. If you don’t have a specific property, check the assessor’s site to find the local tax rate. You can also enter tax on a monthly basis by clicking the “Monthly” link.**HOA Fees**: If your property has a homeowners association (HOA), you’ll pay dues. Click the “Annually” or “Monthly” link and enter the dollar amount of your dues.**Principal & Interest**: The principal is the part of your payment that returns the money you borrowed to the lender. Interest is what you pay to compensate the lender for advancing money to you.**Monthly Payment**: The total monthly payment includes principal and interest, which repays your loan. You’ll also pay property taxes (either as part of your payment to your lender or separately), homeowners insurance premiums and possible HOA dues.**Principal Payment**: The principal payment is the part of your monthly mortgage payment that reduces your balance. At first, most of your payment goes toward the interest charged.**Interest Payment**: The interest payment is part of your monthly mortgage payment, which covers your interest charges. Over time, this amount becomes smaller as you pay down your loan balance.**Total Cost with Interest**: Your total cost includes the repayment of your principal balance plus the total interest paid to the lender.

### Current Rates to Help Calculate Your Mortgage Payments

Changing interest rates can impact your housing costs. To get the most accurate mortgage calculation, you should factor in current interest rates and lock in a low rate when you're ready to buy. Review today's mortgage rates to learn more about economic factors that impact interest trends. This daily report can also help you determine when to lock in your rate.

### Geek Out: Equation to Calculate Your Mortgage Payment

Most people use an online mortgage calculator, a spreadsheet or a financial calculator to come up with their principal and interest payment. The actual formula to calculate loan payments by hand is fairly complicated:

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

- P = principal loan amount (that’s your amount borrowed)
- i = monthly interest rate (your annual interest rate divided by 12)
- n = number of months required to repay the loan (term of the loan in years multiplied by 12 months)

You can get a principal and interest, or P&I payment by using the PMT formula in Excel:

**PMT(i, n, P)**

Finally, you can use a financial calculator to calculate a P&I. Enter the three mortgage loan terms:

**Number of payments**(loan term times 12). The entry key will be an N or n.**Interest rate.**Divide the annual mortgage rate by 12 and enter using the I, i or I/Y key**Loan amount.**The amount of the mortgage loan is the present value entered using the PV key.

Select the payment (PMT) key or compute plus payment — CPT plus PMT — keys to calculate the monthly mortgage payment. For example, enter 360 for “n” on a 30-year mortgage. Next, enter 0.0029 for the monthly interest rate on a 3.5% loan and $100,000 for the amount of the loan. The resulting payment amount should be $449.27.

There are many rules of thumb for mortgage affordability. A mortgage lender might determine a home loan is affordable if your debt-to-income (DTI) ratio is 43% or lower. Others set the maximum DTI at 36% or 50%. But affordability is a personal decision. How much are you comfortable spending on a mortgage? Lenders don’t consider your goals, family plans or lifestyle when evaluating your loan application.

Your debt-to-income ratio, or DTI, incorporates your monthly debt payments plus your housing payment, including principal, interest, taxes, homeowners insurance and HOA dues if applicable. It does not count living expenses, like food or utilities, or taxes. The higher your DTI, the less wiggle room you have if your income drops or an unexpected expense crops up.

The more you put down when you buy your home, the less you have to finance, and the lower your monthly payment will be. That said, there are many mortgage programs that require less than 5% down. And government-backed VA and USDA programs require no down payment.

Private Mortgage Insurance (PMI) is a requirement for most conventional loans, which are non-government loans. You can get rid of PMI by refinancing if your new loan won’t exceed 80% of the current property value. Or you can request termination of PMI when your loan balance drops to 80% of the original property value. PMI terminates automatically when the loan balance falls to 78% of the original property value if paid on the original loan schedule. You don’t get automatic termination by prepaying your loan. If you have a USDA or FHA loan, the only way to cancel its mortgage insurance is to pay it off.

There are several strategies for paying off your mortgage.

- Use a refinance calculator and refinance to a loan with a lower payment, but continue to pay the larger amount. The extra will reduce your balance faster.
- Add an amount for principal reduction to your monthly payment.
- Divide your loan payment in half and pay it every two weeks.
- Make an extra payment once a year.
- Use your tax refunds and other windfalls to reduce your mortgage balance.

Some experts caution against prepaying home loans unless you have an emergency savings account, no higher-interest debt and have fully funded your retirement account. Others recommend directing your mortgage prepayment money to an investment or savings account, and then paying off your mortgage when you have enough saved to do so. This way, you have access to your money if you need it.

It feels good to zero out your mortgage balance. Many financial experts recommend paying off your home loan before retiring to lower your monthly bills and increase your financial security. But prepaying your mortgage isn’t always the smartest financial decision:

- Once your lender has your money, it’s hard to get it back for emergencies. You’d have to apply for a home equity loan and pay interest and fees.
- Paying off your mortgage may not save you much if your interest rate is low. You may be able to earn more by investing your extra money in stocks or other vehicles.

The decision to pay off a mortgage is personal. And it’s important, so consider asking a financial planner or accountant before prepaying your home loan.

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### The Importance of Knowing How to Calculate a Mortgage

- While there are plenty of mortgage calculators out there that do all the heavy lifting for you
- It can actually be helpful to know the math behind it
- You’ll probably better understand the implications of paying extra/early or the impact of a lower interest rate
- And if nothing else you can impress your friends and family

Mortgages can be complicated business – fortunately there are a ton of great calculators out there that take the legwork out of all the tricky math.

But as your teachers probably told you in school time and time again, it’s good to actually know how things work too. That’s why they asked you to show your work!

And hey, it’s never smart to rely too heavily on technology in case something goes wrong. Oh, and you can impress your friends too. Well, probably not, but let’s move on.

That brings us to how mortgage interest works. Ready to do some light algebra? Neither am I, but let’s try it anyway.

### The Interest Part Is Easy to Calculate

- It’s very easy to calculate monthly mortgage interest
- A standard calculator will do the job if you need to run a quick calculation
- Simply multiply your loan amount by your interest rate and divide by 12
- That will give you the monthly interest due based on the outstanding principal balance

Let’s say you’ve got a 30-year fixed mortgage with a loan amount of $200,000 and your mortgage rate is 3.5%. Fairly common scenario these days.

A simple way to determine how much your interest payment is each month is to multiple your loan amount by the interest rate, and then divide by 12.

$200,000 x 0.035 / 12= $583.33

So in the scenario above, we’d come up with $583.33. This would be the interest portion of your monthly mortgage payment. Pretty basic stuff here. No algebra required!

Had this article been written back in 2006, we’d be done because most people held interest-only loans and didn’t even make principal payments.

But times have changed, and now everyone wants to pay off their mortgages early. Funny how things change…

### How Do You Calculate the Entire Payment, Including Principal?

- The entire monthly payment formula is a bit more complex
- But you can still do it by hand if you’ve got nothing better to do
- Or are simply a math buff who wants to know how things work
- And perhaps more importantly why you’re paying the bank so much money!

Most people probably don’t care nor want to know this second part, but I figured I’d share just to cover all the bases and blow your mind.

If you want to calculate your entire mortgage payment, including both the principal and interest portion, you need to use the very complex monthly mortgage payment formula below.

And yes, it’s heavy on the algebra, real heavy for those of us not so thrilled with math. Warning: It’ll hurt your head.

### Here Is the Mortgage Formula

### P = L[c(1 + c) n]/[(1 + c) n – 1]

P= monthly payment

L = loan amount = $200,000

C = periodic interest rate = 0.002917 (3.5%/12 months)

N = number of payments = 360 (30 years)

Lost yet? Don’t worry; I won’t make you do the math. Heck, I used an algebraic calculator to come up with the answer.

**Let’s break it down:**

P = 200,000[0.002917(1.002917)^360]/ [(1.002917)^360-1]

P = 200,000 x 0.00449045

P = $898.09

Still with me? Phew. So the total monthly mortgage payment is $898.09. And because we know the interest portion already ($583.33), the principal portion of the payment must be $314.76.

Of course, it’s not that simple, nothing ever is. This calculation above is only good for the very first payment based on the $200,000 loan amount and a 30-year amortization schedule.

When calculating the following month’s payment, you would have you use the new loan balance, which falls to $199,685.24 thanks to that $314.76 principal payment.

Remember, each month on a fully-amortizing mortgage the balance goes down because a portion of the payment goes toward principal.

This is good news because it means you actually own more of your home each month instead of the bank.

Fortunately, we already know the total payment amount, which is **fixed** for the full loan term, so we can just calculate interest and then the rest must be principal.

### In month two we calculate mortgage interest via the following formula:

$199,685.24 x 0.035 / 12 = $582.42

Instead of using the original $200,000 loan amount, we need to account for that first principal payment made in month one.

The $314.76 in principal lowers the outstanding balance to $199,685.24.

If we multiply that amount by the same 3.5% interest rate and divide by 12, the total is $582.42, which is the interest due for month two.

When we take our fixed total monthly payment amount of $898.09 and subtract $582.42, we come up with $315.67, which is the second principal payment.

As you can see, the interest portion of the payment dropped slightly, while the principal portion increased.

In month three, you’d owe $581.49 in interest and pay $316.60 toward principal.

It’s the same $898.09 you owe to your lender each month, but the composition of the payment changes.

### The Amount of Interest Due Dwindles Over Time

As time goes on, the interest portion of the mortgage payment falls, thanks to the smaller outstanding balance, and as a result the principal portion of the payment rises.

In fact, at the end of the loan term, assuming you don’t refinance your mortgage or prepay, the interest portion will account for just a small sliver of the total payment.

For example, in month 321 of our hypothetical home loan, you’d owe just $98.76 in interest, with the remaining $799.33 going toward the outstanding balance.

Remember, the total payment amount on a fixed-rate mortgage doesn’t change for the entire 360 months (or 180 months if it’s a 15-year fixed).

But **how your mortgage payment is allocated does change over time**.

Knowing this can help you better understand your mortgage and perhaps dictate decisions when it comes to a possible refinance.

I’ve probably confused more people than intended here, but it’s always good to know how things work, even if you don’t actually do the math yourself.

For the record, I recommend using a mortgage calculator as opposed to trying to do all this math by hand.

It’s interesting to know how it is calculated, but way too much work. And you should be spending your free time doing something a lot more fun.

Read more:Are mortgage calculators actually accurate?

(photo: Jorge Franganillo)

## How Do You Calculate Your Estimated Mortgage Payment

You make better decisions when you fully understand your mortgage. Taking some time to crunch the numbers can help you develop an accurate assessment of your loan situation so you’re more likely to pay it off in the long run. Here at Assurance Financial, we have the information you need to estimate your mortgage payment and provide a mortgage lending calculator that can make the task a little easier. If you know what type of mortgage you’ll be applying for, you may also be able to use a calculator designed for that loan type, like a conventional mortgage calculator or a jumbo mortgage calculator.

#### Need to quickly calculate your estimated mortgage payment? Use our mortgage payment calculator to determine how much you may need to pay.

Want to learn more? Below we’ve mapped out how to calculate your estimated mortgage payment and highlighted a few details to pay attention to during the process.

- You Can Plan Your Financial Future
- You’ll Determine How Much Home You Can Actually Afford

- Your Monthly Income
- The Market Value of the Home
- The Loan Amount
- The Type of Loan
- The Interest Rate on the Loan
- The Number of Years You Have to Repay

### Why Is It Important to Calculate My Estimated Mortgage Payment?

Most people who buy a home secure a mortgage to finance their purchase. The mortgage includes both the principal and the interest, which is paid to the lender in monthly installments for the duration of your loan’s term. A home is generally the largest purchase a person makes during their lifetime, so you’ll want to know exactly what you’re getting yourself into before you take the leap.

Calculate your estimated mortgage payment to determine whether you can actually afford the home you’re looking to buy. Here are a few reasons why it’s important to calculate your estimated mortgage payment:

### 1. You Can Plan Your Financial Future

Calculating an estimated payment will also help you when you’re planning out your financial future. Because most mortgages last for many years, often up to 30 years, having a solid estimate of what your cost of living will be every month for the coming years or decades will give you the freedom to plan how much money you can allocate to other expenses and financial goals.

### 2. You’ll Determine How Much Home You Can Actually Afford

Calculating your estimated payment will also give you an idea of how much house you can comfortably afford. Can you afford a $300,000 home? Or can you only comfortably afford a home valued at $150,000? Knowing early on how much you can actually afford will save you a lot of time and potential heartbreak when you don’t waste your time considering houses out of your price range.

When you calculate your estimated mortgage payment, you may want to ensure that your monthly payment won’t keep you from meeting your other financial obligations and goals. With this mortgage payment, can you still afford your other monthly bills? Will you still be able to hit your target savings rate for retirement and your emergency fund? Is this a payment that can comfortably fit into your budget?

If the answer is no, then you may want to consider another home or a mortgage with different terms. Or you may simply want to put off buying a home until it’s an expense you can comfortably cover.

If the answer is yes, and you are comfortable with your estimated mortgage payment, then buying a home may be the right next step for you.

### What Information Do I Need to Get Started, and Where Can I Find It?

To begin calculating your estimated mortgage payment, think about the following information for the potential mortgage loan:

- Your monthly income
- The market value of the home
- The loan amount
- The type of loan
- The interest rate on the loan
- The number of years you have to repay

### 1. Your Monthly Income

If you have a budget, you should already know exactly what your monthly income is. If you don’t have a budget yet, you may want to create one so your calculations for home affordability will be easier. If you don’t know your monthly income, check your pay stubs from the past few months. Add up your paychecks for each month to calculate your monthly income.

If you have a large monthly income that consistently gives you a huge surplus in your budget, that may affect the loan terms you choose. With a large income, maybe you feel comfortable with larger monthly mortgage payments and want to opt for a 15-year term that will result in you repaying your loan much faster than you would for with a 30-year term.

### 2. The Market Value of the Home

To figure your mortgage payment, you’ll need to know the market value of the home you’re interested in purchasing. How much is your home going to cost you? Though the median listing price for a home in the U.S. is about $300,000, the market varies in different areas. The median home price in some California cities, for example, is nearly $1 million. In other areas, the median home price may be closer to $100,000 or even less.

### 3. The Loan Amount

To calculate your estimated mortgage payment, you’ll also need to factor in the total loan amount. The amount of money you borrow for the loan is also known as the principal. When estimating your mortgage payment, experiment with the loan amount to determine how much of a loan you can comfortably afford. You may only qualify for a maximum loan amount, so knowing how much you can expect to get from a lender can help you determine whether you can finance the home you’re interested in.

### 4. The Type of Loan

It may also be helpful to have an idea of which type of mortgage loan you’ll be securing to calculate your estimated mortgage payment. There are six major types of mortgage loans:

- Conventional loans
- FHA loans
- USDA loans
- VA loans
- Construction loans
- Jumbo loans

**Conventional Loan**

**Conventional Loan**

A conventional loan is the most common type of mortgage in the U.S. The down payment necessary for a conventional loan tends to be higher than other mortgage options. You can choose either a fixed or adjustable interest rate. A conventional loan is great for new homebuyers, and you may be able to eliminate private mortgage insurance premiums by paying a large enough down payment.

To be eligible for a conventional loan, you should have a moderate credit score and a low debt-to-income ratio. You’ll probably also want a 20 percent down payment. For a loan of $100,000, that amounts to $20,000 for a down payment.

**FHA Loan**

**FHA Loan**

An FHA loan is insured by the Federal Housing Administration. If you don’t have great credit or a large income, then an FHA mortgage may be a great option for you. They tend to be popular with first-time homebuyers, and you can get a fixed interest rate for a 15-year or 30-year term.

To be eligible for an FHA loan, you need a credit score of at least 500, an employment history from the last two years and verifiable income. You could put as little as 10 percent down if your credit score falls between 500 to 579. If your credit score is at least 580, your down payment may be as low as 3.5 percent.

**USDA Loan**

**USDA Loan**

A USDA loan can be secured by borrowers who live in qualifying areas designated by the Department of Agriculture. For this loan type, you don’t need to have an excellent credit score or a high income. In fact, to qualify for this loan type, you need to have a low income relative to your area. You also must be a citizen or eligible non-citizen, and you must make the home you’re purchasing your primary residence.

**VA Loan**

**VA Loan**

A VA loan is specifically for veterans and is backed in part by the Department of Veterans Affairs. These loans generally have the lowest rates of the major mortgage types and can be secured by members of the military, Reserves, National Guard or their spouses.

You can qualify by:

- Serving for 90 consecutive days during wartime
- Serving for 180 days during peacetime
- Serving for six years in the Reserves or National Guard
- Being the spouse of a service member who died on active duty

**Construction Loan**

**Construction Loan**

A construction loan pays for buying land and building a house. Generally, these loans come with a maximum one-year term, and the lender will distribute the money to the borrower as construction progresses rather than in a lump sum. Rates tend to be higher for this loan type than for others because of its high risk for lenders.

To qualify for a construction loan, you’ll want a good credit score, a stable income, a large down payment and a low debt-to-income ratio.

**Jumbo Loan**

**Jumbo Loan**

A jumbo loan is for homes that are particularly pricey. If you’re looking to purchase a home that will cost more than $424,100, and you’re a high-income earner, you may want to consider a jumbo loan.

Qualifying for a jumbo loan is more difficult than other loans. You’ll need a higher credit score, a low ratio of debt-to-income and a significant down payment. You’ll also need to provide proof of cash reserves, employment history and income. Because requirements can vary from lender to lender, you’ll want to check with your lender to see the exact requirements for a jumbo loan.

Everyone has their own individual financial situation and goals, which is why there are multiple loan options to meet the various needs of borrowers.

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### 5. The Interest Rate on the Loan

Your loan’s interest rate is another piece of information you’ll need to calculate your estimated mortgage payment. Mortgage interest rates fluctuate with the market and are affected by factors such as the U.S. Federal Reserve’s monetary policy, the market, the economy and inflation.

The interest rate will determine what the total cost is of borrowing your loan from the lender. Interest is essentially a fee the lender charges for loaning you the money to purchase your home. In the early years of paying off your loan, your monthly payment will primarily be interest.

For borrowers, the interest rate you can secure depends on your credit score and history. Generally, borrowers with higher credit scores tend to receive the lowest interest rates. However, you likely will still receive a good interest rate if your score falls between is mid-range. Use your credit score in your calculations to help you determine what interest rate you may qualify for and how that affects your overall financial obligation. If your credit score is low and results in a high-interest rate, you may want to take some steps to improve your credit score before pursuing a mortgage loan.

### 6. The Number of Years You Have to Repay

The final piece of information you’ll need to calculate your estimated mortgage payment is the length of your loan. How many years will you have to repay your loan? Most loans have a 30-year term but some are 15 years.

If you’re interested in lowering your monthly payment, you might consider increasing the term of your loan. Monthly payments for a $200,000 mortgage will be higher for a 15-year loan term than for a 30-year term, for example.

If you consistently have a surplus in your monthly budget, however, you may feel comfortable with a higher payment if it means you’ll pay off your mortgage in half the time. A 15-year fixed loan also tends to offer a lower interest rate than a 30-year fixed loan.

For example, on a 30-year loan of $160,000 at a fixed rate of 4.125 percent, your total interest paid would be approximately $119,000. For a 15-year fixed loan of the same amount at an interest rate of 3.52 percent, you’ll pay only about $46,000 in interest. That amounts to $73,000 saved by repaying your mortgage in half the time.

When calculating your estimated mortgage payment, you’ll want to have these important pieces of information on hand. For any information you don’t have exact numbers for, experiment with the numbers in your calculations to see what might work for you.

### What Is a Fixed-Rate Loan? How Do I Calculate It?

A fixed-rate loan has an interest rate that doesn’t change at all over the course of the loan term. The monthly payment stays the same every month, which makes monthly or yearly budgeting easy and predictable for borrowers. Fixed-rate mortgages generally have higher rates than variable rate loans, but they also protect homeowners from fluctuations in the housing market. Further, since the housing crisis of 2008, the gap between adjustable rates and fixed rates has virtually closed, meaning fixed interest rates can be just as low as variable rates.

If interest rates in the market increase, you won’t be affected and won’t have to worry about your interest costs or mortgage payments increasing. You can find a fixed interest rate for several term options, including 15-year and 30-year terms. With a fixed rate, when you initially begin paying your mortgage, your early payments tend to be mostly interest rather than principal. Over the years, your payment will gradually comprise more principal than interest. This process is known as loan amortization.

This does not affect the size of your monthly payment, which remains consistent month to month until the loan balance is completely repaid.

A fixed-rate loan is a great option for a borrower who wants the stability of a consistent monthly payment and wants to avoid the risk of a variable interest rate that may cause increased payments.

So how do you calculate your fixed-rate loan? You need to know the amount of the loan and the mortgage payment factor. The formula for those loans is: Loan Payment = Amount/Discount Factor.

Before you begin, you’ll need to calculate the discount factor using the following formula:

- Number of periodic payments (n) = payments per year times number of years
- Periodic Interest Rate (i) = annual rate divided by the number of payments per
- Discount factor (D) = {[(1 + i) ^n] – 1} / [i(1 + i)^n]

Seem complicated? Check out Assurance Financial’s Mortgage Calculator Tool and we can help.

To use the calculator, you’ll first input your mortgage loan information. This includes your mortgage loan amount, your annual interest rate, the number of months of your loan term and your desired amortization schedule.

Next, you’ll fill in your property information. This includes the sale price of the property, your annual property taxes, your annual hazard insurance and your monthly private mortgage insurance. You may also opt to let our system estimate your property taxes, hazard insurance and private mortgage insurance for you.

After you’ve filled in all the applicable information, hit Calculate, and we’ll give you your estimated monthly payments and an estimate of how much you’ll pay in interest over the life of the loan. Check to see how close you came when you calculated the estimates yourself.

### How Do I Calculate an Interest-Only Loan Estimate?

Interest-only loan estimates are far less complicated to calculate. With each payment, you aren’t actually paying down the loan. Lenders generally list interest rates as annual figures, so you’ll divide the rate by 12 for each month of the year to calculate what your monthly rate will be. The formula for an interest-only loan is:

Loan Payment = Amount x (Interest Rate/12)

or

P = A x I

For example, if your interest rate is 6 percent, you would divide 0.06 by 12 to get a monthly rate of 0.005. You would then multiply this number by the amount of your loan to calculate your loan payment. If your loan amount is $100,000, you would multiply $100,000 by 0.005 for a monthly payment of $500.

A simpler calculation may be first multiplying the loan amount of $100,000 by the interest rate of 0.06 to get $6,000 of yearly interest, then dividing that $6,000 by 12 to get your monthly payment of $500. Regardless of which method you choose, you’ll still end up with the same value.

Your payment amount will stay the same until you make an additional payment, after a certain period when you’re required to make an amortizing payment or you pay off the entire loan.

### Finance Your Home With Assurance Financial

Still confused about how to calculate your estimated mortgage payment? Contact Assurance Financial today or check out our Mortgage Calculator Tool. Our team of loan officers is dedicated to making the loan process as easy as possible for you.

At Assurance Financial, we want to help you secure the right mortgage for your dream home. Financing your home should be an exciting, memorable time in your life, and we want to make every step in the process as smooth and enjoyable for you as possible. When you contact us, we’ll put you in touch with a loan officer who will help you secure the right mortgage for your dream home.

## Mortgage Calculator: Estimate Your Monthly House Payments

A mortgage is often a necessary part of buying a home, but it can be difficult to understand what you’re paying for—and what you can actually afford. A mortgage calculator can help borrowers estimate their monthly mortgage payments based on the purchase price, down payment, interest rate and other monthly homeowner expenses.

### How to Calculate Mortgage Payments Using Our Calculator

Whether you’re shopping around for a mortgage or want to build an amortization table for your current loan, a mortgage calculator can offer insights into your monthly payments. Follow these steps to use the Forbes Advisor mortgage calculator:

**1. Enter the home price and down payment amount.** Start by adding the total purchase price for the home you’re seeking to buy on the left side of the screen. If you don’t have a specific house in mind, you can experiment with this number to see how much house you can afford. Likewise, if you’re considering making an offer on a home, this calculator can help you determine how much you can afford to offer. Then, add the down payment you expect to make as either a percentage of the purchase price or as a specific amount.

**2. Enter your interest rate.** If you’ve already shopped around for a loan and have been offered a range of interest rates, enter one of those values into the interest rate box on the left. If you haven’t prequalified for an interest rate yet, you can enter the current average mortgage rate as a starting point.

**3. Choose a loan term.** To help calculate your monthly mortgage payment, enter a loan term up to a maximum of 30 years. Keep in mind that if you haven’t already been approved for a loan term and interest rate, the rate you select here should correspond with the average rate you entered above. For example, if you choose a 15-year term, also use the average rate for 15-year mortgages. If, instead, you’re trying to strike a balance between low monthly payments and a shorter term, you can use this portion of the calculator to compare your options.

**4. Add in taxes, insurance and HOA fees.** This portion of the calculator is optional, but it can help give you a more accurate picture of your potential monthly payments. If you have the information available, plug in your monthly property tax, private mortgage insurance (PMI), homeowners insurance and homeowners association (HOA) fees. If you don’t have these numbers in front of you, some information may be available through your real estate agent or your local property assessor’s website.

**5. Review your loan details.** Once you enter all of the relevant information on the left side of the screen, the calculator will auto-populate your payment breakdown on the right. This portion of the calculator lets you view your monthly payments as well as your estimated payoff month. Navigate to the amortization schedule tab to view how much of your annual payments will go toward interest and principal. You can also toggle between the annual and monthly view to see a breakdown of each monthly payment.

### Decoding Your Mortgage Costs

If this is your first time shopping for a mortgage, the terminology can be intimidating. It also can be difficult to understand what you’re paying for—and why. Here’s what to look for when reviewing your mortgage costs:

**Principal.**Principal is the amount of money you borrowed on the mortgage. A portion of each payment will go toward paying this off, so the number will go down as you make monthly payments.**Interest rate.**This is essentially what the lender is charging you to borrow the money. Your interest rate is expressed as a percentage and may be fixed or variable.**Property taxes.**Property taxes are imposed by your local tax authority. This number can usually be viewed on your recorder or assessor’s website—wherever you access property cards and other real estate records.**Homeowners insurance.**Homeowners insurance is required to protect you and your lender in the case of damage to your home. If you’re considering a home, ask the real estate agent if they have any information about current insurance costs. Otherwise, contact your local insurance agent to get a quote.**Mortgage insurance.**Also known as private mortgage insurance—or PMI—this protects the lender in case you default on your mortgage. It typically ranges from 0.58% to 1.86% of your total mortgage amount and you will need to factor this in if your down payment is less than 20%.

### How Much House Can You Afford?

How much house you can afford depends on several factors, including your monthly income, existing debt service and how much you have saved for a down payment. When determining whether to approve you for a certain mortgage amount, lenders pay close attention to your debt-to-income ratio (DTI), which is a comparison of your total monthly debt payment to your monthly pre-tax income. In general, your monthly housing costs shouldn’t be more than about 28% of your income, though you may be approved with a higher percentage.

Keep in mind, however, that just because you can afford a house on paper doesn’t mean your budget can actually handle the new payments. Beyond the factors your bank considers when pre-approving you for a mortgage amount, consider how much money you’ll have on-hand after you make the down payment. It’s best to have at least three months of payments in savings in case you experience financial hardship. Also calculate how much you expect to pay in maintenance and other house-related expenses each month.

Likewise, when determining how much house you can afford, consider your other financial goals. For example, if you’re planning to retire early, determine how much money you need to save or invest each month and then calculate how much you’ll have leftover to dedicate to a mortgage payment. Ultimately, the house you can afford depends on what you’re comfortable with—just because a bank pre-approves you for a mortgage doesn’t mean you should maximize your borrowing power.

### Choosing the Mortgage Term Right for You

A mortgage term is the length of time you have to pay off your mortgage—stated another way, it’s the time span over which a mortgage is amortized. The most common mortgage terms are 15 and 30 years, though other terms also exist and may even range up to 40 years. The length of your mortgage terms dictates (in part) how much you’ll pay each month—the longer your term, the lower your monthly payment.

That said, interest rates are usually lower for 15-year mortgages than for 30-year terms, and you’ll pay more in interest over the life of a 30-year loan. To determine which mortgage term is right for you, consider how much you can afford to pay each month and how quickly you prefer to have your mortgage paid off.

If you can afford to pay more each month but still don’t know which term to choose, it’s also worth considering whether you’d be able to break even—or, perhaps, save—on the interest by choosing a lower monthly payment and investing the difference.

### How Forbes Advisor Estimates Your Monthly Mortgage Payment

Forbes Advisor’s mortgage calculator makes it easy to estimate your monthly mortgage payment using your home price, down payment and other loan details. Based on that information, it also calculates how much of each monthly payment will go toward interest and how much will cover the loan principal. You can also view how much you’ll pay in principal and interest each year of your mortgage term.

To make these calculations, our tool uses this data:

**Home price.**This is the amount you plan to spend on a home.**Down payment amount.**The amount of money you will pay to the sellers at closing. This amount is subtracted from the home price to determine the amount you’ll be financing with the mortgage.**Interest rate.**If you’ve already started shopping for a mortgage, enter the interest rate offered by the lender. If not, check out the current average mortgage rate to estimate your potential payments.**Loan term.**The loan term is the length of the mortgage in years. The most popular terms are for 15 and 30 years, but other terms are available.**Additional monthly costs.**In addition to principal and interest, the calculator considers costs associated with property taxes, private mortgage insurance (PMI), homeowners insurance and homeowners association fees.

### Frequently Asked Questions (FAQs)

### How does a mortgage work?

A mortgage is a secured loan that is collateralized by the home it is financing. This means that the lender will have a lien on your home until the mortgage is paid in full. After closing, you’ll make monthly payments—which covers principal, interest, taxes and insurance. If you default on the mortgage, the bank will have the ability to foreclose on the property.

### How do you apply for a mortgage?

Mortgages are available through traditional banks and credit unions as well as a number of online lenders. To apply for a mortgage, start by reviewing your credit profile and improving your credit score so you’ll qualify for a lower interest rate. Then, calculate how much home you can afford, including how much of a down payment you can make. When you’re ready to apply, compile necessary documentation like income verification and proof of assets and start shopping for the best rates.

### You May Also Like

Forbes Advisor adheres to strict editorial integrity standards. To the best of our knowledge, all content is accurate as of the date posted, though offers contained herein may no longer be available. The opinions expressed are the author’s alone and have not been provided, approved, or otherwise endorsed by our partners.

## Mortgage payment calculator

Skip to main content

### Calculate how much your mortgage payment could be each month.

**This mortgage payment calculator gives you an estimate.**

This mortgage payment calculator provides customized information based on the information you provide. But, it assumes a few things about you. For example, that you’re buying a single-family home as your primary residence. This calculator also makes assumptions about closing costs, lender’s fees and other costs, which can be significant.

### Understand your monthly mortgage payment.

Your monthly mortgage payment depends on a number of factors, like purchase price, down payment, interest rate, loan term, property taxes and insurance.

### Purchase price

Purchase price refers to the total amount you agree to pay to the property’s seller. This amount is typically different from your loan amount, since most lenders won’t loan you the full amount of a property’s purchase price.

#### Calculator assumption: single-family home

This mortgage payment calculator assumes that you’re buying a single-family home as your primary residence.

#### What can *formula to compute mortgage payments* afford?

Our mortgage affordability calculator can give you an idea of your target purchase price. You can make the calculation based on your income or how much you’d like to pay per month.

Calculate your mortgage affordability

#### Get prequalified.

Are you ready to start taking steps toward a new home? If your answer is yes, get an estimate of what you may be able to borrow in just a few minutes.

Apply for prequalification

### Down payment

A down payment is the cash you pay up front when you buy a home. The larger your down payment, the less you’ll need to borrow and pay in interest.

#### Calculator assumption: 20% down payment

This mortgage payment calculator assumes that you have a 20% down payment, unless you specify otherwise. If you have less than a 20% down payment, you may have to pay private mortgage insurance (PMI), which would increase your monthly mortgage payment.

#### How much will you put down?

Want to see how much your down payment amount can affect your mortgage over time? Our down payment calculator can give an idea of your ideal down payment.

Calculate your down payment

#### Start saving for a down payment.

When you’re ready to buy a home, a higher down payment can save you money in the long run. If you plan to buy in the near future, setting money aside now can only help.

Learn to save for a down payment

#### Reach out to a mortgage loan officer.

If you’re ready to have a conversation about your mortgage options, a professional mortgage loan officer is just a phone call or an email away.

Find a mortgage loan officer

### Interest rate

The interest rate is the amount of money your lender charges you for using their money. It’s shown as a percentage of your principal loan amount.

#### Understand your credit score.

Credit score is a pretty big deal when it comes to buying a home. The higher your credit score, the better your chances are for approval and for better interest rates.

Learn how to build credit

#### Browse all mortgage products.

U.S. Bank offers loans that meet almost every mortgage need, and our mortgage loan officers are ready to go to work for you.

Compare mortgage products

### More tools and calculators

### Today’s mortgage rates

Interest rates vary depending on the type of mortgage you choose. See the differences and how they can impact your monthly payment.

Compare mortgage rates

### Fixed-rate mortgage calculator

Fixed-rate loans offer a consistent rate and monthly payment over the life of the loan. They typically have 10- 15- 20- or 30-year loan terms, but other terms may be available.

Calculate a fixed-rate monthly payment

### Adjustable-rate mortgage calculator

Adjustable-rate mortgage (ARM) loans often feature lower rates and monthly payments during their initial rate period, but rates can change once the initial rate period expires.

Calculate an ARM monthly payment

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### The Importance of Knowing How to Calculate a Mortgage

- While there are plenty of mortgage calculators out there that do all the heavy lifting for you
- It can actually be helpful to know the math behind it
- You’ll probably better understand the implications of paying extra/early or the impact of a lower interest rate
- And if nothing else you can impress your friends and family

Mortgages can be complicated business – fortunately there are a ton of great calculators out there that take the legwork out of all the tricky math.

But as your teachers probably told you in school time and time again, it’s good to actually know how things work too. That’s why they asked you to show your work!

And hey, it’s never smart to rely too heavily on technology in case something goes wrong. Oh, and you can impress your friends too. Well, probably not, but let’s move on.

That brings us to how mortgage interest works. Ready to do some light algebra? Neither am I, but let’s try it anyway.

### The Interest Part Is Easy to Calculate

- It’s very easy to calculate monthly mortgage interest
- A standard calculator will do the job if you need to run a quick calculation
- Simply multiply your loan amount by your interest rate and divide by 12
- That will give you the monthly interest due based on the outstanding principal balance

Let’s say you’ve got a 30-year fixed mortgage with a loan amount of $200,000 and your mortgage rate is 3.5%. Fairly common scenario these days.

A simple way to determine how weather underground edmonds your interest payment is each month is to multiple your loan amount by the interest rate, and then divide by 12.

$200,000 x 0.035 / 12= $583.33

So in the scenario above, we’d come up with $583.33. This would be the interest portion of your monthly mortgage payment. Pretty basic stuff here. No algebra required!

Had this article been written back in 2006, we’d be done because most people held interest-only loans and didn’t even make principal payments.

But times have changed, and now everyone wants to pay off their mortgages early. Funny how things change…

### How Do You Calculate the Entire Payment, Including Principal?

- The entire monthly payment formula is a bit more complex
- But you can still do it by hand if you’ve got nothing better to do
- Or are simply a math buff who wants to know how things work
- And perhaps more importantly why you’re paying the bank so much money!

Most people probably don’t care nor want to know this second part, but I figured I’d share just to cover all the bases and blow your mind.

If you want to calculate your entire mortgage payment, including both the principal and interest portion, you need to use the very complex monthly mortgage payment formula below.

And yes, it’s heavy on boney m daddy cool mp3 song algebra, real heavy for those of us not so thrilled with math. Warning: It’ll hurt your head.

### Here Is the Mortgage Formula

### P = L[c(1 + c) n]/[(1 + c) n – 1]

P= monthly payment

L = loan amount = $200,000

C = periodic interest rate = 0.002917 (3.5%/12 months)

N = citizen watch com of payments = 360 (30 years)

Lost yet? Don’t worry; I won’t make you do the math. Heck, I used an algebraic calculator to come up with the answer.

**Let’s break it down:**

P = 200,000[0.002917(1.002917)^360]/ [(1.002917)^360-1]

P = 200,000 x 0.00449045

P = $898.09

Still with me? Phew. So the total monthly mortgage payment is $898.09. And because we know the interest portion already ($583.33), the principal portion of the payment must be $314.76.

Of course, it’s not that simple, nothing ever is. This calculation above is only good for the very first payment based on the $200,000 loan amount and a 30-year amortization schedule.

When calculating the following month’s payment, you would have you use the new loan balance, which falls to $199,685.24 thanks to that $314.76 principal payment.

Remember, each month on a fully-amortizing mortgage the balance goes down because a portion of the payment goes toward principal.

This is good news because it means you actually own more of your home each month instead of the bank.

Fortunately, we already know the total payment amount, which is **fixed** for the full loan term, so we can just calculate interest and then the rest must be principal.

### In month two we calculate mortgage interest via the following formula:

$199,685.24 x 0.035 / 12 = $582.42

Instead of using the original $200,000 loan amount, we need to account for that first principal payment made in month one.

The $314.76 in principal lowers the outstanding balance to $199,685.24.

If we multiply that amount by the same 3.5% interest rate and divide by 12, the total is $582.42, which is the interest due for month two.

When we take our fixed total monthly payment amount of $898.09 and subtract $582.42, we come up with $315.67, which is the second principal payment.

As you can see, the interest portion of the payment dropped slightly, while the principal portion increased.

In month three, you’d owe $581.49 in interest and pay $316.60 toward principal.

It’s the same $898.09 you owe to your lender each month, but the composition of the payment changes.

### The Amount of Interest Due Dwindles Over Time

As time goes on, the interest portion of the mortgage payment falls, thanks to the smaller outstanding balance, and as a result the principal portion of the payment rises.

In fact, at the end of the loan term, assuming you don’t refinance your mortgage or prepay, the interest portion will account for just a small sliver of the total payment.

For example, in month 321 of our hypothetical home loan, you’d owe just $98.76 in interest, with the remaining $799.33 going toward the outstanding balance.

Remember, the total payment amount on a fixed-rate mortgage doesn’t change for the entire 360 months (or 180 months if it’s a 15-year fixed).

But **how your mortgage payment is allocated does change over time**.

Knowing this can help you better understand your mortgage and perhaps dictate decisions when it comes to a bridgepoint hospital refinance.

I’ve probably confused more people than intended here, but it’s always good to know how things work, even if you don’t actually do the math yourself.

For the record, I recommend using a mortgage calculator as opposed to trying to do all this math by hand.

It’s interesting to know how it is calculated, but way too much work. And you should be spending your free time doing something a lot more fun.

Read more:Are mortgage calculators actually accurate?

(photo: Jorge Franganillo)

## Mortgage Payment Calculator with PMI, Taxes, Insurance & HOA Dues

Mortgage calculators are useful — but not if they don’t tell you how much your *true* home payment will be. To arrive at this number, home buyers must use a mortgage payment calculator that includes things like private mortgage insurance (PMI), property taxes, homeowners insurance, HOA dues, and other costs. The below calculator does just that. Leaving nothing to chance, it allows you to estimate all parts of your future home payment.

See today’s mortgage rates, November 28, 2021

### Mortgage eligibility

Mortgage loans are typically available to those who meet the following qualifications:

- A credit score of 620 or higher
- A debt-to-income ratio of 43% or less (higher DTI acceptable with compensating factors)
- 1-2 years of consistent employment history (most likely 2 years if self-employed)
- A home that meets the lender’s property standards

These are general guidelines, however, and home shoppers should get a full qualification check and pre-approval letter from a lender. Many buyers are eligible, but don’t know it yet.

Verify your home buying eligibility (Nov 28th, 2021)### How we calculate your mortgage payment

### Additional mortgage calculators

This calculator assumes a conventional loan offered by Fannie Mae or Freddie Mac. However, conventional is not the best loan type for everyone. Also check out other calculators by The Mortgage Reports:

### Mortgage calculator Q&A

**How much house can I afford?**

How much house you can afford depends on a number of factors. Primarily: your income, current debts, credit score, and how much you’ve saved for a down payment. You can also afford a more expensive house **the lower your mortgage rate is**. Use the “by income” tab on our **mortgage calculator** to see exactly how much house you can afford based on your income, down payment, and current interest rates.

**How much is a typical mortgage payment?**

A typical mortgage payment is about $912 per month, according to 2018 data from **CoreLogic**. That $912 is the average principal and interest (P&I) payment for a mortgage loan. It does not factor in other monthly costs like property taxes, insurance, and HOA dues. Use the calculator above to estimate your own mortgage payment, including typical taxes, insurance, and HOA dues in your state.

**How do you calculate a mortgage payment on a calculator?**

To calculate your mortgage payment using a mortgage calculator, you’ll need to input details about your loan. Those include home price, down payment, interest rate, and your projected taxes and insurance costs. Note: You likely won’t know the exact interest rate until you’re close to closing and you **“lock” a rate in**. But you can estimate your payment using **today’s average mortgage rates**.

**How much is the mortgage payment on…**

We calculated mortgage payments for the following home prices using a 10% down payment, and formula to compute mortgage payments 3.73% interest rate (the **weekly average rate** for a 30-year loan at the time of this writing). Sample payments include principal and interest only. **$100,000 house** — $454/month**$200,000 house** — $908/month**$300,000 house** — $1,362/month**$400,000 house** — $1,816/month **$500,000 house** — $2,270/month

Your own monthly mortgage payment will probably be different than the examples shown above. That’s because monthly payments depend on your exact interest rate, down payment, and more. But you can use these samples as a point of reference to see how payments compare for various loan sizes.

**How much do you need to make per year to afford…**

Below are a few examples of home prices that would be affordable on different salaries. These scenarios assume a 10% down payment, 3.73% interest rate (the **average** at the time of this writing), and $500 in monthly debts outside the mortgage payment. Samples assume a 30-year fixed-rate home loan, and a **debt-to-income ratio** of 36%.**$100,000 house** — $32,000/year**$200,000 house** — $47,000/year**$300,000 house** — $62,000/year**$400,000 house** — $77,000/year**$500,000 house** — $92,000/year

Remember, these scenarios are just a frame of reference. The home you can actually afford doesn’t just depend on salary. Monthly income matters, but so do your mortgage rate and any other debts you pay month to month. You may also be able to afford more on your salary if you have lower monthly debts. Use our **“by income” calculator** to see how much house you can really afford on your salary.

**How does a mortgage payment calculator work?**

Our mortgage payment calculator estimates your total monthly mortgage payment, including:

– Principal

– Interest

– Property taxes

– Homeowners insurance

– HOA dues, if applicable

Mortgage calculators determine your monthly principal and interest based on your loan amount, loan term, down payment, and interest rate. These factors are used to make a payment (or “amortization”) schedule. It shows how the loan amount will deplete over the course of your mortgage, with regular monthly payments. You can see your own projected mortgage payment schedule by clicking **“view full report” in this calculator**.

In addition, The Mortgage Reports uses national and state databases to estimate your monthly payments for taxes and insurance. Actual numbers will vary. But it’s important to include these costs in your estimate, as they can add a few hundred dollars per month to your mortgage payment.

Following is a sample mortgage payment schedule for a $300,000 house, purchased using a 30-year mortgage with 10% down and a 3.73% interest rate.

You can see how over time, a bigger portion of each monthly payment goes toward the principal balance, and a smaller portion goes toward interest.

*Image: The Mortgage Reports*

### Mortgage calculator: Fees and definitions

The above mortgage calculator details costs associated with loans or with home buying in general. But many buyers don’t know why each cost exists. Below are descriptions of each cost.

**Principal and interest.** This is the amount that goes toward paying off the loan balance plus the interest due each month. This remains constant for the life of your fixed-rate loan.

**Private mortgage insurance (PMI).** Based on recent PMI rates from mortgage insurance provider MGIC, this is a fee you pay on top of your mortgage payment to insure the lender against loss. PMI is required any time you put less than 20% down on a conventional loan. Is PMI worth it? See formula to compute mortgage payments analysis here.

**Property tax.** The county or municipality in which the home is located charges a certain amount per year in taxes. This cost is split into 12 installments and collected each month with your mortgage payment. Your lender collects this fee because the county can seize a home if property taxes are not paid. The calculator estimates property taxes based on averages from tax-rates.org.

**Homeowners insurance**. Lenders require you to insure your home from fire and other damages. This fee is collected with your mortgage payment, and the lender sends the payment to your insurance company each year.

**HOA/other.** If you are buying a condo or a home in a Planned Unit Development (PUD), you may need to pay homeowners association (HOA) dues. Lenders factor in this cost when determining your ratios. (See an explanation of debt-to-income ratios above). You may put in other home-related fees such as flood insurance in this field. Lenders don’t consider costs such as utilities or maintenence, but feel free to put in any additional expenses to get a view of your all-inclusive payment.

**Loan term.** The number of years it takes to pay off the loan (assuming no additional principal payments). Mortgage loans most often come in 30- or 15-year options.

**Down payment.** This is the dollar amount you put toward your home cost. Conventional loans require just 3% down, and 20% down is required to avoid mortgage insurance. Down payments can come from a down payment gift or eligible assistance program.

**Interest rate.** The mortgage rate your lender charges. Shop at least three lenders to find the best rate.

### More about home loan qualification

Learning how to buy a home has never been easier. Following are articles to get you started, whether you’ve purchased a home before or this is your first time.

### Check your home buying eligibility

Home buyers are often eligible to buy right now, but they often don’t know it.

The best way to check is to request an eligibility check via online request. You will be in contact with a lender in a few minutes, who can walk you through the quick process.

Verify your home buying eligibility (Nov 28th, 2021)**Sources:**

Property tax averages: http://www.tax-rates.org/taxtables/property-tax-by-state

PMI rates: https://www.mgic.com/rates/ratefinder

http://www.freddiemac.com/research/insight/20180417_consumers_leaving_money.page

**Home Value: **the appraised value of a home. This is used in part to determine if property mortgage insurance (PMI) is needed. **Loan Amount:** the amount a borrower is borrowing against the home. If the loan amount is chase bank account customer service phone number 80% of the appraisal then PMI is required until the loan is paid off enough to where the Loan-to-value (LTV) is below 80%.**Interest Rate: **this is the quoted APR a bank charges the borrower. In some cases a borrower may want to pay points to lower the effective interest rate. In general discount points are a better value if the borrower intends to live in the home for an extended period of time & they expect interest rates to rise. If the buyer believes interest rates will fall or plans on moving in a few years then points are a less compelling option. **This calculator** can help home buyers figure out if it makes sense to buy points to lower their rate of interest. For your convenience we also **publish current local mortgage rates**.**Loan Term: **the number of years the loan is scheduled to be paid over. The 30-year fixed-rate loan is the most common term in the United States, but as the economy has went through more frequent booms & busts this century it can make sense to purchase a smaller home with a 15-year mortgage. If a home buyer opts for a 30-year loan, most of their early payments will go toward interest on the loan. Extra payments applied directly to the principal early in the loan term can save many years off the life of **formula to compute mortgage payments** loan.**Property Tax: **this is the local rate home owners are charged to pay for various municipal expenses. Those who rent ultimately pay this expense as part of their rent as it is reflected in their rental price. One can't simply look at the old property tax payment on a home to determine what they will be on a forward basis, as the assessed value of the home & the effective rate may change over time. Real estate portals like Zillow, Trulia, Realtor.com, Redfin, Homes.com & Movoto list current & historical property tax payments on many properties. If property tax is 20 or below the calculator treats it as an annual assessment percentage based on the home's price. If property tax is set above 20 the calculator presumes the amount entered is the annual assessment amount.**PMI: **Property mortgage insurance policies insure the lender gets paid if the borrower does not repay the loan. **PMI** is only required on conventional mortgages if they have a Loan-to-value (LTV) above 80%. Some home buyers **take out a second mortgage** to use as part of their downpayment on the first loan to help bypass PMI requirements. **FHA** & **VA loans** have different down payment & loan insurance requirements which are reflected in their monthly payments. **Homeowners insurance:** most homeowner policies cover things like loss of use, personal property within the home, dwelling & structural damage & liability. Typically earthquakes & floods are excluded due to the geographic concentration of damage which would often bankrupt local insurance providers. Historically flood insurance has been heavily subsidized by the United States federal government, however in the recent home price recovery some low lying areas in Florida have not recovered as quickly as the rest of the market due in part to dramatically increasing flood insurance premiums.**HOA:** home owner's association dues are common in condos & other shared-property communities. They cover routine maintenance of the building along with structural issues. Be aware that depending on build quality **HOA fees** can rise significantly 10 to 15 years after a structure is built, as any issues with build quality begin to emerge.

Our site also publishes an in-depth glossary of industry-related terms **here**.

## How Do You Calculate Your Estimated Mortgage Payment

You make better decisions when you fully understand your mortgage. Taking some time to crunch the numbers can help you develop an accurate assessment of your loan situation so you’re more likely to pay it off in the long run. Here at Assurance Financial, we have the information you need to estimate your mortgage payment and provide a mortgage lending calculator that can make the task a little easier. If you know what type of mortgage you’ll be applying for, you may also be able to use a calculator designed for that loan type, like a conventional mortgage calculator or a jumbo mortgage calculator.

#### Need to quickly calculate your estimated mortgage payment? Use our mortgage payment calculator to determine how much you may need to pay.

Want to learn more? Below we’ve mapped out how to calculate your estimated mortgage payment and highlighted a few details to pay attention to during the process.

- You Can Plan Your Financial Future
- You’ll Determine How Much Home You Can Actually Afford

- Your Monthly Income
- The Market Value of the Home
- The Loan Amount
- The Type of Loan
- The Interest Rate on the Loan
- The Number of Years You Have to Repay

### Why Is It Important to Calculate My Estimated Mortgage Payment?

Most people who buy a home secure a mortgage to finance their purchase. The mortgage includes both the principal and the interest, which is paid to the lender in monthly installments for the duration of your loan’s term. A home is generally the largest purchase a person makes during their lifetime, so you’ll want to know exactly what you’re getting yourself into before you take the leap.

Calculate your estimated mortgage payment to determine whether you can actually afford the home you’re looking to buy. Here are a few reasons why it’s important to calculate your estimated mortgage payment:

### 1. You Can Plan Your Financial Formula to compute mortgage payments src="https://assurancemortgage.com/wp-content/uploads/2017/12/3-You-Can-Plan-Your-Financial-Future.jpg.webp" alt="you can plan your financial future" width="1044" height="386">

Calculating an estimated payment will also help you when you’re planning out your financial future. Because most mortgages last for many years, often up to 30 years, having a solid estimate of what your cost of living will be every month for the coming years or decades will give columbia savings bank the freedom to plan how much money you can allocate to other expenses and financial goals.

### 2. You’ll Determine How Much Home You Can Actually Afford

Calculating your estimated payment will also give you an idea of how much house you can comfortably afford. Can you afford a $300,000 home? Or can you only comfortably afford a home valued at $150,000? Knowing early on how much you can actually afford will save you a lot of time and potential heartbreak when you don’t waste your time considering houses out of your price **formula to compute mortgage payments** you calculate your estimated mortgage payment, you may want to ensure that your monthly payment won’t keep you from meeting your other financial obligations and goals. With this mortgage payment, free food pantry open today near me you still afford your other monthly bills? Will you still be able to hit your target savings rate for retirement and your emergency fund? Is this a payment that can comfortably fit into your budget?

If the answer is no, then you may want to consider another home or a mortgage with different terms. Or you may simply want to put off buying a home until it’s an expense you can comfortably cover.

If the answer is yes, and you are comfortable with your estimated mortgage payment, then buying a home may be the right next step for you.

### What Information Do I Need to Get Started, and Where Can I Find It?

To begin calculating your estimated mortgage payment, think about the following information for the potential mortgage loan:

- Your monthly income
- The market value of the home
- The loan amount
- The type of loan
- The interest rate on the loan
- The number of years you have to repay

### 1. Your Monthly Income

If you have a budget, you should already *formula to compute mortgage payments* exactly what your monthly income is. If you don’t have a budget yet, you may want to create one so your calculations for home affordability will be easier. If you don’t know your monthly income, check your pay stubs from the past few months. Add up your paychecks for each month to calculate your monthly income.

If you have a large monthly income that consistently gives you a huge surplus in your budget, that may affect the loan terms you choose. With a large income, maybe you feel comfortable with larger monthly mortgage payments and want to opt for a 15-year term that will result in you repaying your loan much faster than you would for with a 30-year term.

### 2. The Market Value of the Home

To figure your mortgage payment, you’ll need to know the market value of the home you’re interested in purchasing. How much is your home going to cost you? Though the median listing price for a home in the U.S. is about $300,000, the market varies in different areas. The median home price in some California cities, for example, is nearly $1 million. In other areas, the median home price may be closer to $100,000 or even less.

### 3. The Loan Amount

To calculate your estimated mortgage payment, you’ll also need to factor in the total loan amount. The amount of money you borrow for the loan is also known as the principal. When estimating your mortgage payment, experiment with the loan amount to determine how much of a loan you can comfortably afford. You may only qualify for a maximum loan amount, so knowing how much you can expect to get from a lender can help you determine whether you can finance the home you’re interested in.

### 4. The Type of Loan

It may also be helpful to have an idea of which type of mortgage loan you’ll be securing to calculate your estimated mortgage payment. There are six major types of mortgage loans:

- Conventional loans
- FHA loans
- USDA loans
- VA loans
- Construction loans
- Jumbo loans

**Conventional Loan**

**Conventional Loan**

A conventional loan is the most common type of mortgage in the U.S. The down payment necessary for a regions bank login online banking account loan tends to be higher than other mortgage options. You can choose either a fixed or adjustable interest rate. A conventional loan is great for new homebuyers, and you may be able to eliminate private mortgage insurance premiums by paying a large enough down payment.

To be eligible for a conventional loan, you should have a moderate credit score and a low debt-to-income ratio. You’ll probably also want a 20 percent down payment. For a loan of $100,000, that amounts to $20,000 for a down payment.

**FHA Loan**

**FHA Loan**

An FHA loan is insured by the Federal Housing Administration. If you don’t have great credit or a large income, then an FHA mortgage may be a great option arvest jobs near me you. They tend to be popular with first-time homebuyers, and you can get a fixed interest rate for a 15-year or 30-year term.

To be eligible for an FHA loan, you need a credit score of at least 500, an employment history from the last two years and verifiable income. You could put as little as 10 percent down if your credit score falls between 500 to 579. If your credit score is at least 580, your down payment may be as low as 3.5 percent.

**USDA Loan**

**USDA Loan**

A USDA loan can be secured by borrowers who live in qualifying areas designated by the Department of Agriculture. For this loan type, you don’t need to have an excellent credit score or a high income. In fact, to qualify for this loan type, you need to have a low income relative to your area. You also must be a citizen or eligible non-citizen, and you must make the home you’re purchasing your primary residence.

**VA Loan**

**VA Loan**

A VA loan is specifically for veterans and is backed in part by the Department of Veterans Affairs. These loans generally have the lowest rates of the major mortgage types and can be secured by members of the military, Reserves, National Guard or their spouses.

You can qualify by:

- Serving for 90 consecutive days during wartime
- Serving for 180 days during peacetime
- Serving for six years in the Reserves or National Guard
- Being the spouse of a service member who died on active duty

**Construction Loan**

**Construction Loan**

A construction loan pays for buying land and building a house. Generally, these loans come with a maximum one-year term, and the lender will distribute the money to the borrower as construction progresses rather than in a lump sum. Rates tend to be higher for this loan type than for others because of its high risk for lenders.

To qualify for a construction loan, you’ll want a good credit score, a stable income, a large down payment and a low debt-to-income ratio.

**Jumbo Loan**

**Jumbo Loan**

A jumbo loan is for homes that are particularly pricey. If you’re looking to purchase a home that will cost more than $424,100, and you’re a high-income earner, you may want to consider a jumbo loan.

Qualifying for a jumbo loan is more difficult than other loans. You’ll need a higher credit score, a low ratio of debt-to-income and a significant down payment. You’ll also need to provide proof of cash reserves, employment history and income. Because requirements can vary from lender to lender, you’ll want to check with your lender to see the exact requirements for a jumbo loan.

Everyone has their own individual financial situation and goals, which is why there are multiple loan options to meet the various needs of borrowers.

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### 5. The Interest Rate on the Loan

Your loan’s interest rate is another piece of information you’ll need to calculate your estimated mortgage payment. Mortgage interest rates fluctuate with the market ope midwest are affected by factors such as the U.S. Federal Reserve’s monetary policy, the market, the economy and inflation.

The interest rate will determine what the total cost is of borrowing your loan from the lender. Interest is essentially a fee the lender charges for loaning you the money to purchase your home. In the early years of paying off your loan, your monthly payment will primarily be interest.

For borrowers, the interest rate you can secure depends on your credit score and history. Generally, borrowers with higher credit scores tend to receive the lowest interest rates. However, you likely will still receive a good interest rate if your score falls between is mid-range. Use your credit score in your calculations to help you determine what interest rate you may qualify for and how that affects your overall financial obligation. If your credit score is low and results in a high-interest rate, you may want to take some steps to improve your credit score before pursuing a mortgage loan.

### 6. The Number of Years You Have to Repay

The final piece of information you’ll need to calculate your estimated mortgage payment is the length of your loan. How many years will you have to repay your loan? Most loans have a 30-year term but some are 15 years.

If you’re interested in lowering your monthly payment, you might consider increasing the term of your loan. Monthly payments for a $200,000 mortgage will be higher for a 15-year loan term than for a 30-year term, for example.

If you consistently have a surplus in your monthly budget, however, you may feel comfortable formula to compute mortgage payments a higher payment if it means you’ll pay off your mortgage in half the time. A 15-year fixed loan also tends to offer a lower interest rate than a 30-year fixed loan.

For example, on a 30-year loan of $160,000 at a fixed rate of 4.125 percent, your total interest paid would be approximately $119,000. For a 15-year fixed loan of the same amount at an interest rate of 3.52 percent, you’ll pay only about $46,000 in interest. That amounts to $73,000 saved by repaying your mortgage in half the time.

When calculating your estimated mortgage payment, you’ll want to have these important pieces of information on hand. For any information you don’t have exact numbers for, experiment with the numbers in your calculations to see what might work for you.

### What Is a Fixed-Rate Loan? How Do I Calculate It?

A fixed-rate loan has an interest rate that *formula to compute mortgage payments* change at all over the course of the loan term. The monthly payment stays the same every month, which makes monthly or yearly budgeting easy and predictable for borrowers. Fixed-rate mortgages generally have higher rates than variable rate loans, but they also protect homeowners from fluctuations in the housing market. Further, since the housing crisis of 2008, the gap between adjustable rates and fixed rates has virtually closed, meaning fixed interest rates can be just as low as variable rates.

If interest rates in the market increase, you won’t be affected and won’t have to worry about your interest costs or mortgage payments increasing. You can find a fixed interest rate for several term options, including 15-year and 30-year terms. With a fixed rate, when you initially begin paying your mortgage, your early payments tend to be mostly interest rather than principal. Over the years, your payment will gradually comprise more principal than interest. This process is known as loan amortization.

This does not affect the size of your monthly payment, which remains consistent month to month until the loan balance is completely repaid.

A fixed-rate loan is a great option for a borrower who wants the stability of a consistent monthly payment and wants to avoid the risk of a variable interest rate that may cause increased payments.

So how do you calculate your fixed-rate loan? You need to know the amount of the loan and the mortgage payment factor. The formula for those loans is: Loan Payment = Amount/Discount Factor.

Before you begin, you’ll need to calculate the discount factor using the following formula:

- Number of periodic payments (n) = payments per year times number of years
- Periodic Interest Rate (i) = annual rate divided by the number of payments per
- Discount factor (D) = {[(1 + i) ^n] – 1} / [i(1 + i)^n]

Seem complicated? Check out Assurance Financial’s Mortgage Calculator Tool and we can help.

To use the calculator, you’ll first input your mortgage loan information. This includes your mortgage loan amount, your annual interest rate, the number of months of your loan term and your desired amortization schedule.

Next, you’ll fill in your property information. This includes the sale price of the property, your annual property taxes, your annual hazard insurance and your monthly private mortgage insurance. You may also opt to let our system estimate your property taxes, hazard insurance and private mortgage insurance for you.

After you’ve filled in all the applicable information, hit Calculate, and we’ll give you your estimated monthly payments and an estimate of how much you’ll pay in interest over the life of the loan. Check to see how close you came when you calculated the estimates yourself.

### How Do I Calculate an Interest-Only Loan Estimate?

Interest-only loan estimates are far less complicated to calculate. With each payment, you aren’t actually paying down the loan. Lenders generally list interest rates as annual figures, so you’ll divide the rate by 12 for each month of the year to calculate what your monthly rate will be. The formula for an interest-only loan is:

Loan Payment = Amount x (Interest Rate/12)

or

P = A x I

For example, if your interest rate is 6 percent, you would divide 0.06 by 12 to get a monthly rate of 0.005. You would then multiply this number by the amount of your loan to calculate your loan payment. If your loan amount is $100,000, you would multiply $100,000 by 0.005 for a monthly formula to compute mortgage payments of $500.

A simpler calculation may be first multiplying the loan amount of $100,000 by the interest rate of 0.06 to get $6,000 of yearly interest, then dividing that $6,000 by 12 to get your monthly payment of $500. Regardless of which method you choose, you’ll still end up with the same value.

Your payment amount will stay the same until you make an additional payment, after a certain period when you’re required to make an amortizing payment or you pay off the entire loan.

### Finance Your Home With Assurance Financial

Still confused about how to calculate your estimated mortgage payment? Contact Assurance Financial today or check out our Mortgage Calculator Tool. Our team of loan officers is dedicated to making the loan process as easy as possible formula to compute mortgage payments you.

At Assurance Financial, we want to help you secure the right mortgage for your dream home. *Formula to compute mortgage payments* your home should be an exciting, memorable time in your life, and we want to make every step in the process as smooth and enjoyable for you as possible. When you contact us, we’ll put you in touch with a loan officer who will help you secure the right mortgage for your dream home.

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