Formula for calculating mortgage payments

Formula for calculating mortgage payments
Real estate agent and customers shaking hands together celebrating finished contract after about home insurance and investment loan, handshake and successful deal.

If you are considering refinancing your mortgage or buying a new home, you can calculate your monthly mortgage repayments using a unique calculation formula. For this formula, you need some key numbers that are in your mortgage documents.


To calculate the mortgage payment for a mortgage loan, you need to know your principal amount, interest rate երկար loan length.

  • Principal amount This is the amount of credit or money you want to borrow. In the example below, this amount is $ 100,000.
  • Interest Rate This is the interest rate charged by the financial institution or bank. In the example below, this figure is 5%.
  • Loan length This is the loan term or number of years. In the example below, the time is 15 years.

Step 1. Change the interest rate to a decimal

The first step in calculating your monthly mortgage repayments is to convert the APR to a decimal fraction. To do this.

i = APR / 100:

For example, if you have a 5% interest rate, 5/100 = .05. In this example, therefore, i = .05

Step 2. Calculate the monthly interest rate

Next, determine your monthly interest rate. To do this, divide the decimal interest rate calculated in one stage by the payment frequency.

I = i / PF:

If the loan must be repaid every month of the year, then 12 is the payment frequency. For example: .05 / 12 = .004167. In this example, therefore, I = .004167.

Step 3. Determine the total amount of payments

The third step in calculating your mortgage payment is determining how much you will pay over the life of your loan. To do this, multiply the loan length by the payment frequency.

n = L x PF:

For example, do you make monthly payments if you have a 15-year loan? 15 x 12 = 180: You will then create 180 payments over the life of your mortgage. In this example, therefore, n = 180.

Step 4. Calculate the term

Fifth, calculate the term of the pledge. The formula for this calculation is:

T = (1 + I) n

Using the example of 0.004167, the calculation would be: 1 + 0.004167 = (1.004167) 180 = 2.11383: In this example, then T = 2.11383.

Step 5. Calculate your monthly mortgage payment

Finally, it’s time to calculate the total monthly mortgage payment. Assuming that the interest rate is complicated for a monthly, fixed interest rate mortgage, the formula is:

M = P (I x T) / T -1)

In this example: 100,000 [(.004167 x 2.11383) / (2.11383 – 1)] = 100,000 (.0088083 / 1.11383) 100,000 x .0079081 = 790.81. Therefore, in this example, M = $ 790.81.

Determine the common interest

If you want to know how much interest you will pay over the life of the loan, multiply your monthly payment by the loan term, then subtract the principal amount. For example, $ 790.81 equals $ 142,345.80 multiplied by 180 payments (15 years) and the principal amount minus $ 100,000 equals $ 42,345.80. Then, for 15 years, you will repay an interest rate of about $ 42,345.

If you want to pay more

Making overpayments or overpayments on a mortgage loan can reduce the interest you can pay on the loan. Several online calculators help you decide how making an extra payment will affect your loan.

  • Final Calculators In addition to the basics of your loan, this “final” calculator allows you to enter a customs payment amount or provide a lump sum or double payment as you wish. It also allows users to enter an annual interest rate increase, which can help calculate the rate of savings on a regulated interest rate mortgage. Once provided, the calculator will give you information on how much extra payment is required and how much less interest you will pay because of the excess cost.
  • Use of a free online calculator. This additional payment calculator allows users to enter an extra amount they will pay each month or an additional one-time fee. It provides a comparison of repayments, detailing the months the mortgage has been paid and the amount of interest payable.

Monthly payment calculation calculator

This amortization calculator gives you a simple way to estimate your monthly payment.

Calculating your payment

As shown, mortgage repayment becomes more accessible by calculating the above formula into several steps. Determining the amount you pay each month helps you decide if you can afford to take the total amount offered or buy the house you fell in love with.

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