How is a mortgage payment calculated?

A mortgage payment is calculated using the formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1], where M is the monthly payment, P is the principal loan amount, i is the monthly interest rate, and n is the total number of payments.

Mortgage Calculator

Calculate your monthly mortgage payments, total interest paid, and amortization schedule.

Calculate Mortgage Payments

Loan Amount ($):

Annual Interest Rate (%):

Loan Term (Years):

Down Payment ($):

Common Mortgage Scenarios

Click on these links to see instant calculations with common values:

Understanding Mortgage Calculations

A mortgage is a loan used to buy a home or other real estate. Mortgage payments typically consist of principal and interest. Understanding how these payments are calculated is crucial for homeowners and prospective buyers.

Formula

M = P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ – 1]

Where:
• M = Monthly payment
• P = Principal loan amount (the original amount borrowed)
• i = Monthly interest rate (annual rate divided by 12)
• n = Total number of payments (loan term in years multiplied by 12)

Key Concepts

Principal: The initial amount of the loan.
Interest Rate: The cost of borrowing money, expressed as an annual percentage.
Loan Term: The length of time over which the loan is repaid.
Amortization: The process of paying off a debt over time through regular payments.

Frequently Asked Questions

What is an amortization schedule?

An amortization schedule is a table detailing each periodic payment on an amortizing loan (like a mortgage). It shows the amount of principal and interest contained in each payment until the loan is paid off.

How does a down payment affect my mortgage?

A larger down payment reduces the principal loan amount, which in turn lowers your monthly payments and the total interest paid over the life of the loan. It can also help you qualify for better interest rates.