Things You'll Need:
- Calculator
- Spreadsheet Software
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Step 1
Collect the following pieces of data in order to calculate monthly mortgage payments - principal, interest rate, and number of years for the loan. These three numbers are all you need to easily calculate a current or projected payment. Keep in mind that this information will provide your monthly principal and interest payments and does not include things like mortgage insurance (if required), home owners insurance, taxes, or any other associated costs with your home.
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Step 2
Take the annual interest rate and divide it by 12 to get the monthly interest rate. For example, if your annual interest rate was equal to 5% (or .05), you would dived .05 by 12 (.05/12). In this case the monthly interest rate equals .004166. For simplicity, write down that this value is known as i (or 1 = .004166).
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Step 3
Calculate the total number of payments required over the course of the loan by multiplying the number of years by 12. For example, if you are taking out a 30 year mortgage, the total number of months would equal 360 (12 * 30 = 360). Refer to this vaue as n (or n = 360).
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Step 4
Identify the denominator that will be used to multiply against the principal once i and n have been calculated from the previous two steps. First add 1 to i and calculate it to the nth power. For example, (1 + .0041166) ^ 360 where the '^' refers to raised to the power. In this case, we would calculate (1.0041166) ^ 360, or 4.467744. The last step to calculate the denominator is to subtract 1 which would equal 3.467744 (or 4.467744 - 1).
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Step 5
Figure out the numerator once you have calculated the denominator for your calculation. First take and add 1 to the monthly interest rate (1 + .0041166) and raise it to the nth power (1.0041166 ^ 360). This value in the example we are using should equal 4.467744. Finally, multiple this value (4.467744) by i (.004167) to calculate the numerator. In this example, the numerator would equal .018616.
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Step 6
Take the numerator (.018616) from step #5 and divide it by the denominator (3.467744) from step #4. In our example, this would equal .0053683 which will be multiplied against the principal loan amount to finish our calculation. Keep in mind that these calculations will include principal and interest monthly payments.
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Step 7
Use the value calculated in step #6 (.0053683) and multiply it by the principal loan amount. For simplicity, let's say we are taking out a loan for $100,000. The monthly payment that we have calculated would equal $536.82 per month (or $100,000 * .0053683).
