How to Calculate a House Mortgage

Calculate a home mortgage payment that won't break your back.

Calculating your mortgage payment is an integral part of the decision about which home to buy. It is also a useful skill should you ever contemplate refinancing your home so that you can calculate what the new payment will be. Home mortgage payments can be calculated manually or automatically. The manual method requires that you solve an algebraic formula using the same variables that automatic calculators require. The automatic method requires a financial calculator, a spreadsheet amortization template or an Internet amortization program.

Things You'll Need

• Financial calculator with instruction book, or
• Excel spreadsheet amortization template, or
• Internet amortization program

Instructions

Internet Amortization Method

1. 

   Many websites offer the use of financial calculators free.

   Open your Internet browser and navigate to the Military Financial Education Center, hosted by the University of Maryland University College (see Resources).

2. Click on the “Mortgage Loan Calculator” to calculate the payment on a fixed-rate loan, and fill in the blanks as requested.

3. Click on the "Adjustable Rate Mortgage Calculator" to calculate the payment on an adjustable rate mortgage. Note, however, that calculators of many other loan types are also available on this website. The Education Center also provides links to other useful financial calculation tools, each with a brief description of its uses.

Financial Calculator Method

1. 

   Financial calculators can figure out more than just mortgage payments.

   Multiply the term of your loan in years by 12 to calculate the number of months.

2. Change your calculator mode to Financial, following the manufacturer's instructions.

3. Enter the variables: loan amount, number of payments (usually in months) and the interest rate, according to instructions in your manual. Press the payment button (labeled PMT on most calculators) to see the amount of your mortgage payment.

Excel Spreadsheet Method

1. 

   The spreadsheet method enables you to make calculations without an Internet connection.

   Navigate to the Loan Amortization template on the Microsoft Office website's templates page and download it (see Resources). Microsoft Office creates a folder for Excel templates during the installation process. If you can't find this folder, you may save this file to the Desktop. This particular template is not part of the installation process and must be downloaded.

2. Open the Loan Amortization template in Microsoft Excel.

3. Type the variables for your loan into the cells for loan amount, number of payments and interest rate. The payment amount will automatically appear in the payment cell.

Manual Calculation Method

1. 

   Never warmed up to algebra? This method isn't for you.

   Multiply the principle amount of the loan (P) by the interest rate (R).

2. Add 1 to the interest rate (R) and raise that number to the power of the term (T) in months.

3. Divide the Step 2 answer into 1.

4. Subtract the Step 3 answer from 1.

5. Divide the Step 1 answer by the Step 4 answer. The result is your mortgage payment.

Tips & Warnings

• All the methods described above calculate principle and interest only. Add to the calculated payment any mortgage insurance (PMI) or impounds (taxes and insurance) that some lenders require.

References

• California State University Northridge: Comp 110 Project 02
• University of Maryland University College Military Financial Education Center: Financial Calculators
• Pepperdine University: Using Your Financial Calculator for Financial Calculations
• Microsoft Office Templates: Loan Amortization

Resources

• California State University, Long Beach: Navigating the Mortgage Maze
• University of Maryland University College Military Financial Education Center: Financial Calculators
• Pepperdine University: Using Your Financial Calculator for Financial Calculations
• Microsoft Office Templates: Loan Amortization
• California State University Northridge: Comp 110 Project 02