How to Calculate Mortgage Payments Using a Formula
Your mortgage monthly payment depends on three factors: the size of the mortgage, the interest rate and the term of the mortgage. The larger the loan, the higher the interest rate, or the shorter the term, the higher your monthly mortgage payment. Being able to calculate your monthly payment will help you to make sure that the mortgage you are considering will fit your budget.
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Instructions
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1
Compute the number of monthly payments you must make over the life of the mortgage by multiplying 12 by the number of years in the term of your mortgage. For example, if you took out a 15 year mortgage, you would multiply 15 by 12 to get 180.
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2
Figure your monthly mortgage interest rate by dividing the annual interest rate by 12. For example, if your annual interest rate equals 7.56 percent, you would divide 0.0756 by 12 to find the monthly rate to be 0.0063.
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3
Multiply the monthly interest rate by the amount of the mortgage. Continuing the example, if your mortgage equals $350,000, you would multiply $350,000 by 0.0063 to get $2,205.
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4
Add 1 to the monthly interest rate. In this example, you would add 1 to 0.0063 to get 1.0063.
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5
Use a calculator to compute the result from step 4 to the -Mth power, with M equaling the number of monthly payments made over the term of the mortgage. In this example, you would raise 1.0063 to the -180th power to get 0.322890239.
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6
Subtract the result from step 5 from 1. In this example, you would subtract 0.3228902 from 1 to get 0.677109761.
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Divide the result from step 3 by the result from step 6 to calculate your mortgage monthly payment. In this example, you would divide $2,205 by 0.677109761 to find your monthly payment to be $3,256.49.
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References
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