How to Calculate a Monthly House Payment

Calculating a monthly house payment

A monthly house payment is the amount you need to pay each month to pay back the mortgage on your house. The payment includes the return of the original principal plus the interest needed to satisfy the mortgage. It is important to determine your monthly payment on a mortgage in order to know if you can afford the additional expenses each month. The mortgage payment is affected by the amount of the mortgage, the interest rate and the amount of time you have elected to repay the mortgage. For example, a borrower has a $100,000 loan that charges 12 percent interest. The borrower has 30 years to repay the loan, which will be 360 monthly payments.

Instructions

1. Determine the interest rate per month by dividing the annual interest rate by 12, which represents the number of months in the year. For example, 12 percent divided by 12 equals 1 percent, or 0.01.

2. Multiply the loan amount by the interest rate per month. For example, $100,000 times 0.01 equals $1,000.

3. Add one to the interest rate per month, then raise the sum to the power of the negative amount of required payments. For example, 1 plus 0.01 equals 1.01, then 1.01 raised to the power of -360, or 1.01 multiplied by itself -360 times, equals 0.027817.

4. Subtract the number calculated in step 3 from 1. For example, 1 minus 0.027817 equals 0.972183.

5. Divide the number calculated in Step 2 by the number calculated in Step 4. For example, $1,000 divided by 0.972183 equals $1,028.62. This is the amount you would pay for your monthly payment each month.

References

• Oak Road Systems: Loan or Investment Formulas