How to Calculate a 30-Year Fixed Mortgage

You can calculate the payments on a 30-year mortgage yourself, although most financial calculators are preprogrammed to do the math for you.

A 30-year fixed rate mortgage is one of the most common mortgage arrangements. The extended term, as compared to a 15- or 20-year mortgage, means the monthly payments will be lower for the same loan amount. The total interest paid on the loan will be higher, but most people are more concerned about keeping their monthly costs down, not their lifetime costs. The annual percentage rate (APR) for a 30-year fixed rate mortgage stays constant throughout the life of the loan, meaning the payments will never change unless the loan is refinanced.

Things You'll Need

• Loan amount
• Loan APR
• Calculator

Instructions

1. Calculate the monthly interest rate dividing the loan APR by 12. For a 6 percent APR loan, this value will be 0.06 / 12 = 0.005.

2. Use the payment formula to calculate the monthly payment necessary to amortize the loan over 30 years. This example uses a $200,000 mortgage at 6 percent APR.

   P = V[n(1 + n)^t] / [(1 + n)^t - 1]

   P = Monthly payment

   t = Total number of payments (30 * 12 = 360)

   n = Monthly interest (0.005)

   V = Loan amount (200,000)

   Putting all the values into the formula, the payment amount is $1,199.08.

3. Calculate the interest in the first month's payment. Use the monthly interest rate and the unpaid balance, which is $200,000 for the first payment.

   0.005 * 200,000 = $1,000

4. Calculate the principal in the first month's payment by subtracting the interest from the total monthly payment.

   1,199.08 - 1,000 = $199.08

5. Calculate the new unpaid balance by subtracting the principal in the payment from the current unpaid balance.

   200,000 - 199.08 = $199,800.92

6. Use the new unpaid balance to calculate the principal, interest and new unpaid balance for the next month's payment. Repeat this process until the unpaid balance is zero. There should be a total of 360 payment calculations.

Tips & Warnings

• These equations can be programmed into a spreadsheet, which makes the calculations much easier. There are also a variety of spreadsheet templates available for download that are already programmed to create amortization tables like this. All you need to do is supply the APR, loan amount and term of the loan.

Resources

• Read this Article in Spanish