Mortgage Calculator

Understanding Your Mortgage

Our Mortgage Calculator helps you estimate your monthly mortgage payment, which is a crucial step in the home-buying process. Understanding these numbers allows you to determine how much house you can afford and to plan your budget effectively. A mortgage is a complex financial product, and this tool demystifies the key components of your monthly payment.

The Mortgage Formula Explained

The standard formula for calculating a fixed mortgage payment is: M = P[r(1+r)^n] / [(1+r)^n - 1] Where:

• M = Your monthly mortgage payment
• P = The principal loan amount (the price of the home minus the down payment)
• r = Your monthly interest rate. This is calculated by dividing your annual interest rate by 12.
• n = The number of payments over the loan's lifetime. For a 30-year mortgage, this would be 30 * 12 = 360.

This formula calculates the fixed payment that ensures your loan will be paid off in full by the end of its term.

How to Use the Calculator

1. Home Price: Enter the full purchase price of the home.
2. Down Payment: Input the amount of money you are paying upfront. This is subtracted from the home price to determine the principal loan amount.
3. Loan Term: Select the duration of your mortgage, typically 15, 20, or 30 years.
4. Interest Rate: Enter the annual interest rate quoted by your lender.

After filling in these fields, the calculator will instantly show your estimated monthly payment, along with a breakdown of total principal and interest payments over the life of the loan.

Real-World Example

Imagine you want to buy a home priced at $350,000. You have saved a $70,000 down payment (20%). You secure a 30-year loan with a fixed interest rate of 6.5%.

• Principal (P): $350,000 - $70,000 = $280,000
• Monthly Interest Rate (r): 6.5% / 12 = 0.005417
• Number of Payments (n): 30 years * 12 = 360

Using these numbers, your estimated monthly payment (principal and interest) would be approximately $1,769.77.

Frequently Asked Questions (FAQ)

• What is not included in this monthly payment? This calculation typically covers only the principal and interest (P&I). Your total monthly payment will also include property taxes, homeowners' insurance, and potentially Private Mortgage Insurance (PMI), which is often called PITI.
• What is PMI? Private Mortgage Insurance (PMI) is usually required if your down payment is less than 20% of the home's purchase price. It protects the lender in case you default on the loan. Our calculator focuses on the P&I portion of your payment.
• How can I lower my monthly payment? You can lower your payment by making a larger down payment, choosing a longer loan term (which increases total interest paid), or securing a lower interest rate.
• What is the difference between a 15-year and a 30-year mortgage? A 15-year mortgage has higher monthly payments but a lower total interest cost over the life of the loan. A 30-year mortgage has lower monthly payments, making it more affordable month-to-month, but you'll pay significantly more in interest over time.