How to Calculate Your Mortgage Payments

Borrowers normally submit monthly payments on mortgages.

Houses are expensive. To help alleviate the financial stress of purchasing a house, banks and other lending institutions offer mortgages. A mortgage allows the homeowner to borrow a large sum of money using the home as collateral on the loan. The bank will charge interest to the borrower depending on the borrower's credit rating. It is important the borrower calculates the monthly payments to determine if he can afford to pay them. If he cannot afford the monthly payments, then the lending institution could foreclose on the house.

Instructions

1. Determine the amount of money you will borrow, the interest rate the lender will charge and the number of payments you will have to make. For example, a person takes out a $150,000 mortgage at a 4 percent interest rate and must make 360 payments.

2. Divide the interest rate by 12 months to determine the interest charged per month. In the example, 4 percent divided by 12 months equals 0.003333333.

3. Add the interest charged per month to one. In the example, 1 plus 0.003333333 equals 1.003333333. Raise the sum to the power of the negative of the number of required payments. In the example, raise 1.003333333 to the power of -360. This equals 0.301795865.

4. Multiply the interest rate per month by the amount of money you borrowed. In the example, 0.003333333 times $150,000 equals $500.

5. Divide the number computed in Step 4 by the number you computed in Step 3. In the example, $500 divided by 0.301795865 equals monthly mortgage payments of $1,656.75.

References

• Oak Road Systems: Loan or Investment Formulas
• Bankrate.com: Loan Calculator