The math behind calculating your mortgage payments is complicated, but it’s made simple by using Bankrate’s Mortgage Calculator.
To start, enter the values relating to each section in the corresponding space:
- First, type your home’s price if you’re purchasing, or the current value if you’re interested in refinancing in the “Home Price” section.
- Then type the down payment if you’re purchasing, meaning the upfront payment, in the “Down Payment” section. Or, if you’re refinancing, the amount of equity, which refers to the value of your home, minus what you owe on it. This amount can be entered as a dollar amount or the corresponding percentage of the home price.
- Next enter the term in the “Length of Loan” section, this is usually 30 years, but it can be 20, 15 or 10.
- Lastly, our calculator defaults to the current average interest rate, but you can adjust the percentage in the “Interest Rate” box.
New amounts will appear to the right for principal and interest. You can also enter property taxes, homeowners insurance, and homeowners association fees or just ignore them. These costs don’t affect your principal and interest, though they may be enrolled into your escrow payment.
If you’d prefer to calculate what your monthly mortgage payment woulb be manually. You can use the following formula.
Equation to calculate mortgage payments:
M = P
r (1 + r)n
(1 + rn) - 1
- M = represents the total monthly mortgage payment
- P = represents the principal loan amount
- r = represents your monthly interest rate.
To calculate the monthly rate you'll need to divide the annual rate provided by the lender by 12. For instance, if your interest rate is 5%, your monthly rate would be 0.004167 (0.05/12=0.004167).
- n = represents the number of payments over the loan's lifetime.
To get n, multiply the number of years in your loan term by 12 to get the number of total monthly payments for your loan. For instance, if you have a 30-year fixed mortgage, you’d multiply 30x12, the result would be 360 payments in total.
Using the Mortgage Calculator can help you make important decisions regarding your loan, for example, whether or not you can or should adjust the length of your loan. It’s also a good idea to compare the rates with several lenders, so you can get the best rate possible.
