How to Calculate a Mortgage Amount Given the Monthly Payment
When you are looking to buy a home and want to know how much you can afford, knowing the monthly payment is usually easier to budget for than the cost of the home. If you know the monthly payment, you can find the total amount you can borrow for your mortgage. In order to calculate a mortgage amount given the monthly payment, you also must know the interest rate and the term.
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Instructions
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1
Convert the annual interest rate to a periodic rate by dividing by 12, the number of payments per year. For example, if your mortgage rate is 8.28 percent, you would divide 0.0828 by 12 to get 0.0069.
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2
Multiply the number of years in the term of the mortgage by 12 to calculate the total number of payments. For example, if you had a 25-year mortgage, you would multiply 25 by 12 to get 300 total payments.
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3
Add 1 to the monthly interest rate. In this example, you would add 1 to 0.0069 to get 1.0069.
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4
Raise the result from step three to the power of the negative result from step two. "To the power of" means to use exponents. In this example, you would raise 1.0069 to the -300th power to get 0.127086009.
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5
Subtract the result from step 4 from 1. In this example, you would subtract 0.127086009
from 1 to get 0.872913991. -
6
Multiply the result from step 5 by the monthly payment amount. In this example, if the monthly payment was $1,200, you would multiply 0.872913991 by $1,200 to get $1,047.496789.
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Divide the result from step 6 by the monthly interest rate to learn the mortgage amount. Concluding the example, you would divide $1,047.496789 by 0.0069 to find the mortgage amount would be $151,811.13.
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References
- Photo Credit beautiful home image by Stephen VanHorn from Fotolia.com
