How to Figure Mortgage Payments With Interest
Most people cannot afford to pay for a home upfront so they have to borrow the money from a lender. When you take out a mortgage, the lender, usually a bank or other financial institution, charges interest on the money you borrowed in order to account for inflation, the risk that you will not repay the loan and profit. In order to calculate your monthly mortgage payments with interest, you need to know how much you are borrowing, what the interest rate is and how many monthly payments you will make to repay the loan.
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Instructions
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1
Determine the number of monthly payments you will make by multiplying the number of years in the term of the loan by 12, the number of monthly payments per year. For example, if you took out a 15-year mortgage, you would make 180 payments.
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2
Determine the periodic interest rate expressed as a decimal by dividing the annual interest rate by 1200. For example, if the annual interest rate was 7.83 percent, you would divide by 1200 to find the monthly interest rate expressed as a decimal equals 0.006525.
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3
Add 1 to the result from step 2. For example, you would add 1 to 0.006525 to get 1.006525.
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4
Raise the result from step 3 to the power of the result from step 1. For example, you would raise 1.006525 to the 180th power and get 3.224199753.
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5
Multiply the result from step 4 by the result from step 2. For example, you would multiply
3.224199753 times 0.006525 to get 0.021037903. -
6
Multiply the result from step 5 by the amount you borrowed. For example, if you borrowed $328,000, you would multiply 328,000 by 0.021037903 to get 6900.432312.
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7
Subtract 1 from the result of step 4. For example, you would subtract 1 from 3.224199753 to get 2.224199753.
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Divide the result from step 6 by the result from step 7 to get the monthly payment. For example, you would divide 6900.432312 by 2.224199753 to find that your monthly payment would be $3,102.43.
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Tips & Warnings
If you have an adjustable rate mortgage, you will have to recalculate your monthly payments every time your interest rate changes.
