How to Figure Out the Payments for a Home Loan
Home loans, also known as mortgages, amortize the interest and principal over the term of the loan so that by the end, the entire loan is paid off. However, even though the interest and principal amounts change each month, the total mortgage payment remains the same. If you have a shorter term or higher interest rate, the monthly payment will be higher than if you took a longer term or obtained a lower interest rate.
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Instructions
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Find the monthly interest rate on your mortgage by dividing the annual rate by 12. For example, if your annual mortgage rate equals 7.572 percent, you would divide 0.07572 by 12 to get 0.00631.
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2
Add 1 to the monthly interest rate. Continuing the example, you would add 0.00631 to 1 to get 1.00631.
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3
Multiply the number of years in the mortgage term by 12 to find the number of monthly payments you will make. For example, if you have a 20-year mortgage, you would multiply 20 by 12 to get 240.
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4
Raise the step 2 result to the power of the number of monthly payments you will make. For this example, you would raise 1.00631 to the 240th power to get 4.525110843.
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5
Multiply the step 4 result by the amount borrowed by the monthly interest rate. Furthering the example, if you borrowed $197,200, you would multiply $197,200 by 0.00631 and then by 4.525110843 to get 5,630.740225.
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Subtract 1 from the step 4 result. In this example, you would subtract 1 from 4.525110843 to get 3.525110843.
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Divide the step 5 result by the step 6 result to find the monthly payment. Completing this example, you would divide 5630.740225 by 3.525110843 to find the monthly payment to be $1,597.32.
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