Calculate Your Estimated Monthly Payment
How Mortgage Calculators Work
Mortgage Calculators are an easy way to estimate monthly mortgage payments. They tend to account for PMI’s, homeowners insurance, taxes, and interest. It is calculated based on the borrowing amount and is an important tool to save on your mortgage.
Initially, you’ll need to input the property price or value along with the down payment percentage. Then select the loan type, interest rate, and loan period. Afterward, hit calculate for a rough estimate of the monthly mortgage payment.
It can be used to help find the perfect length of the mortgage term and whether the down payment percentage is sufficient. Additionally, the calculator helps you understand whether a fixed-rate or adjustable-rate mortgage works better for you.
Behind the scenes, the calculation looks like this: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
The variables are as follows:
M = monthly mortgage payment
P = the principal amount
i = monthly interest rate. Your lender probably lists the interest rates as an annual figure, so you’ll need to divide it by 12, for each month of the year. So, if your rate is 5%, then the monthly rate will look like this: 0.05/12 = 0.004167.
n = is the number of payments over the term of the loan. If you take out a 10-year fixed-rate mortgage, this means n = 10 years x 12 months per year, or 120 payments.
Calculating your mortgage payment is usually the first step recommended when financing a property in the USA.