How to Calculate Mortgage Payments for a Home

There are several components that go into a mortgage payment. Missing something can often lead to an unpleasant and very stressful surprise. Follow these simple steps to avoid any unpleasantries or at least be ready to handle them before they actually occur.

Difficulty: Moderate

Instructions

1. Calculate the monthly interest/principal payment based on the amount of the mortgage, the term of the mortgage (how many years the loan is for) and the interest rate. A number of websites offer free mortgage calculators; simply plug in these components to get this number.

2. Determine how much the annual property taxes are on the home, and divide this number by the number of mortgage payments: 12 if it is a monthly mortgage, 26 if it is biweekly.

3. Determine how much your homeowner's insurance will cost annually and divide by the number of mortgage payments (as you did above).

4. Figure in private mortgage insurance (PMI) if you are required to pay it.

5. Add these items - the calculated monthly interest/principal payment, insurance, taxes and PMI - together to determine your actual mortgage payment.

Tips & Warnings

• The seller or listing agent can tell you what the annual property taxes are on the home.
• Most mortgage lenders want the borrower to pay homeowner's insurance as part of the mortgage payment to make sure it gets paid.
• PMI is required by many lenders on first-time buyers, buyers with small down payments and buyers who do not have extensive credit histories or do not have outstanding credit.
• Some websites that have mortgage calculators will even calculate in taxes and insurance.

[Javahead]

on 4/9/2008 This article doesn't deserve to be on eHow.com. Look at step #1, "A number of websites offer free mortgage calculators; simply plug in these components to get this number." Uh-hello? I came to this site to see HOW to calc a mortgage payment, why then would you refer me to other website? I want to see how the calculation is done you moron.

[Javahead]

on 4/9/2008 This article doesn't deserve to be on eHow.com. Look at step #1, "A number of websites offer free mortgage calculators; simply plug in these components to get this number." Uh-hello? I came to this site to see HOW to calc a mortgage payment, why then would you refer me to other website? I want to see how the calculation is done you moron.

on 7/7/2006 Don't fall into the lazy trap of escrowing. Pay yourself into an interest bearing account/investment and pay the taxes when they are due. That's what the bank is doing and how they are getting richer. 2% break is half of what you can get in a decent money market account.

on 11/22/2005 Escrow your taxes into your monthly payment to the bank. Don't elect to pay them yourself. This way, you're not scrambling around at the end of the year to come up with the tax money separately...You've already paid one-twelfth of it each month in your mortgage payment. Also, by having the bank escrow the taxes monthly, and pay them for you annually, a 2% tax discount is usually available and passed on to you, the borrower.