How to Manually Calculate House Payments
Home loans, also known as mortgages, require monthly payments over the life of the loan. Most loans feature consistent monthly payments. At the beginning of the mortgage, most of the monthly payment goes toward paying the interest that accrues on the loan, and the little that is left over goes toward paying down the balance of the loan. However, as the loan progresses, more and more of each payment goes toward principal rather than interest. To calculate the house payment, you need to know the sum you borrowed, the interest rate and the mortgage term.
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Instructions
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1
Calculate the monthly interest rate expressed as a percentage on your mortgage by dividing the annual interest rate expressed as a percentage by 12. For example, if your annual interest rates equals 5.7 percent, you would divide 5.7 by 12 to get 0.475 percent.
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2
Convert the monthly interest rate expressed as a percentage to a monthly interest rate expressed as a decimal by dividing by 100 and calling the result R. Continuing the example, you would divide 0.475 percent by 100 to get 0.00475 for R.
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3
Calculate the number of house payments you will make by multiplying the number of years in your mortgage by 12 and call the result P. For example, if you take out a 30-year mortgage, you would multiply 30 by 12 to get 360 for P.
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4
Plug in P and R in the following expression: (1+R)^P - 1. In this example, you would plug in 0.00475 for R and 360 for P so your expression would be (1+0.00475)^360 - 1, which simplifies to 4.506623085.
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Divide R by the result from Step 4. Continuing, you would divide 0.00475 by 4.506623085 to get 0.001054004.
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6
Add R to the result from Step 5. In this example, you would add 0.00475 to 0.001054004 to get 0.005804004.
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Multiply the result from Step 6 by the amount of your house loan to calculate the monthly house payment. Finishing the example, if you borrowed $260,000, you would multiply $260,000 by 0.005804004 to find your monthly payment equals $1,509.04.
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Tips & Warnings
If you have an adjustable rate loan, you will have to recalculate your monthly payment each time the interest rate changes.
References
- Photo Credit new home 3 image by Kathy Burns from Fotolia.com
