How to Calculate Monthly Payments On a Mortgage

There are countless methods for calculating monthly payments on a mortgage. Some people opt to do it themselves by using a mortgage calculator or spreadsheet, while others trust a mortgage broker to do it for them. Whichever way that you use to figure monthly payments on a mortgage you'll still need to know a few important numbers like principal, interest rate, and length of time for the mortgage. Once you have some basic information, calculating monthly payments on a mortgage is a breeze.

Difficulty: Easy

Instructions

1. For ease of use and immediate results, it's best to use a mortgage calculator tool that is available online from almost every bank, financial institution, and mortgage site around. These are free and by far the simplest way to calculate your monthly payments on a mortgage because all you do is plug in the numbers.

2. When you have your mortgage calculator, the first piece of information that you'll need to figure your monthly payments on a mortgage is the principal amount. This is what you will pay for your house after your downpayment has been applied. Some have an option to put in your downpayment amount and they will deduct it for you, or you can just do it yourself. Say that your loan amount is 200k, and your downpayment is 50k, then your principal would be 150k.

3. The next chunk of information that you'll need to determine the monthly payments on a mortgage is the interest rate. This is the figure that will make a big difference in your monthly payment and also the amount of money that the mortgage company makes off of you. This will normally be a figure between four and ten percent, with the average being around six or seven.

4. Finally, the last fragment of material that you have to type in is the length of time in years that your mortgage will run. The most common type is thirty years but a fifteen year mortgage is something that people also frequently get. This is essentially how long you will make payments on your mortgage before it's finally paid off.

5. Some tools to calculate monthly payments on a mortgage have extra features to account for adjustable rate mortgages, taxes, and insurance which are very important things to consider and can get pretty complicated. If you aren't comfortable with those advanced calculations, or would just like to see everything laid out, you can ask your mortgage broker to prepare a sheet that lists all kinds of different combinations of principal amounts, interest rates, and durations for quick reference when determining how much house you can afford.