How to Calculate Monthy Mortgage Payments
Having the right payment will help make your budget more manageable. Calculating your monthly mortgage payment helps you find the payment rate you can afford. Once your payment is calculated it usually stays the same throughout the term of the loan unless you refinance or have a variable interest rate. When payments are made, a portion goes toward interest and a portion goes toward the principal balance. A monthly mortgage payment can also contain taxes and insurance.
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Instructions
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Determine all of the terms and conditions for your loan. You will need all of the information for your loan. Decide if you want a 15- or 30-year mortgage. The interest rate will be instrumental in calculating your payment. You will need to know how much you are financing. The mortgage loan amount will be needed when you are ready to calculate your payment. If you have a down payment, subtract it from the loan amount to get the amount you will be financing. This is the figure you will need for your payment calculation.
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Use an online mortgage payment calculator. Take the amount of your mortgage and key it into the mortgage payment calculator. You will also need to key in the mortgage term, which can be done using months or years. The next category is the interest rate. Finally, add the mortgage start date. Once all of the mortgage loan terms are entered into the mortgage payment calculator, press the calculate button and your monthly payment will be shown.
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Check to see if your payment is going to be affordable. According to MSN Moneycentral.com the majority of mortgage lenders would like to see no more than 36 percent of your gross monthly income allocated toward your mortgage payment and your other debts. Your mortgage payment will include principal, interest, taxes, insurance and home owners' association fees. If your annual income is $65,000 your monthly mortgage payment should not be more than $1,950, ($65,000/12 = $5,416 x 36 % = $1,950). If you want to play it safe you can use a percentage that is less such as 25 to 33 percent, which is what some financial planners recommend. Using 25 percent your monthly mortgage payment would be $1,354, which is a more comfortable payment.
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Tips & Warnings
Even after calculating your monthly mortgage payment, that may not be the amount you'll pay. Mortgage lenders will take a look at your credit score to help determine your interest rate. The higher your interest rate, the higher your payment will be.
