How to Calculate Mortgage Payments

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By msblakely7
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Calculating a mortgage payment is really a very simple mathematical equation. You don't need a special financial calculator and you don't need the internet. Being able to calculate the principal and interest mortgage payment can be very useful when purchasing a home or and investment property. Using this simple method you will be able to compare loan payments for different loan amounts, varying interest rates or varying loan amounts.

Difficulty: Moderately Easy

Instructions

Step 1

To find the monthly principal and interest payment for a property there are four numbers that you need to know. The first is the loan amount, the second is the length of the loan, and the third is the interest rate. There is a fourth number that you will use, called the payment factor. The payment factor is simply a function of the interest and mortgage length, which I will explain.
Step 2

The formula for calculating the principal and interest payment mortgage payment is as follows:
Loan Amount (divided by 1000) X Payment Factor = Monthly Loan Payment.
Step 3

Begin by taking your loan amount and dividing it by 1000, or simply move the decimal point three spaces to the left. For example, $100,000/1000 = 100, or $100,000.00 with the decimal point moved three spaces to the left is 100.00.
Step 4

Next you will use an amoritization chart to determine the Mortgage Payment Factor. As I mentioned in step one, this is simply a function of the interest rate and mortgage length. The amoritization chart for a 30 year mortgage, which is the most common mortgage length, is given below. Simply find the interest rate you would like to use, and determine the corresponding Payment Factor. The first number listed below is the interest rate (%), the second number is the Payment Factor you will use.
4.00%, 4.774
4.25%, 4.919
4.50%, 5.067
4.75%, 5.216
5.00%, 5.368
5.25%, 5.522
5.50%, 5.678
5.75%, 5.836
6.00%, 5.996
6.25%, 6.157
6.50%, 6.321
6.75%, 6.486
7.00%, 6.653
7.25%, 6.822
7.50%, 6.992
7.75%, 7.164
8.00%, 7.338
8.25%, 7.513
8.50%, 7.689
8.75%, 7.867
9.00%, 8.046
Step 5

Now that you have your mortgage amount (divided by 1000) and you payment factor you can easily calculate the mortgage payment using the formula listed in step two. Mortgage amount (divided by 1000) X Payment Factor.
For example, to calculate a $175,000 loan, with an interest rate of 5.5%, over a 30 year mortgage you would take 175 X 5.678 = $993.65. You principal and interest payment on the loan would be $993.65.
Step 6

The amoritization chart listed above is only a partial chart. As I mentioned, 30 year mortgages are the most common mortgage amount, so I included only the payment factor for this loan length. However I have included a link below that will allow you to obtain a full amoritization chart that you can print if you choose to. It includes interest rates between 1% and 10% and loan lengths for 10 years to 40 years.
Step 7

With this simple formula, and the amoritization chart you can easily compare different loan amounts at different interest rates. You may find this helpful when considering purchasing a home or an investment property.
Step 8

Be sure to check out the resouces secion below!