How To Calculate Monthly Mortgage Principal And Interest

Using An Online Calculator

You can find online mortgage calculators to determine all these values on numerous financial news and information sites, as well as through some lenders. If you prefer not to type your information into a website, you can also find templates for Microsoft Excel and other spreadsheets to do the job for you.

Explanation Of Mortgage Terms

Mortgage terminology can be confusing and overly complicatedbut it doesnt have to be! Weve broken down some of the terms to help make them easier to understand.

Learn about

Home Price

Across the country, average home prices have been going up. Despite the rise in home prices, you can still find a perfect home thats within your budget! As you begin to house hunt, just make sure to consider the most important question: How much house can I afford? After all, you want your home to be a blessing, not a burden.

Learn about

Down Payment

The initial cash payment, usually represented as a percentage of the total purchase price, a home buyer makes when purchasing a home. For example, a 20% down payment on a $200,000 house is $40,000. A 20% down payment typically allows you to avoid private mortgage insurance . The higher your down payment, the less interest you pay over the life of your home loan. The best way to pay for a home is with a 100% down payment in cash! Not only does it set you up for building wealth, but it also streamlines the real estate process.

Learn about

Mortgage Types

15-Year Fixed-Rate Mortgage

30-Year Fixed-Rate Mortgage

5/1 Adjustable-Rate Mortgage

Learn about

Interest Rate

Learn about

Private Mortgage Insurance

Learn about

Homeowners Insurance

Learn about

Homeowners Association Fees

Learn about

Monthly Payment

Learn about

Property Taxes

Mortgage Calculator Uses

Understanding Mortgage Loan Basics

When you buy property, youll often take out a mortgage loan to pay for some of the cost. You will give the lender a right to auction off or take possession of the property if you dont pay back the money and usually commit to making a monthly payment over a certain loan term, such as 30 or 40 years.

Each payment will include a mix of paying back loan principal, or the amount you initially borrowed, and interest, the extra percentage you pay to the lender in exchange for being able to take out the loan. As you continue to make payments, the percentage of each payment going toward principal will rise. As less principal is owed, less interest will be charged.

There may be other items paid through your mortgage payments, including homeowners insurance premiums, property tax and fees paid to a condo or homeowners association.

Read Also: Can You Prequalify For A Mortgage Without Credit Check

How To Choose A Mortgage Lender

You have many options when it comes to choosing a mortgage lender. Banks, credit unions and online lenders all offer mortgages directly, while mortgage brokers and online search tools help you compare options from different lenders.

Its important to make sure you feel comfortable with the broker or company youre working with because youll need to communicate with them frequently during the application processand in some cases, after the loan closes.

You may want to start with the banks or other institutions where you already have accounts, if you like their service. Also, ask your network of friends and family, and any real estate professionals youre working with, for referrals.

Conforming Loans Vs Non

Conforming loanshave maximum loan amounts that are set by the government and conform to other rules set by Fannie Mae or Freddie Mac, the companies that provide backing for conforming loans. A non-conforming loan is less standardized with eligibility and pricing varying widely by lender. Non-conforming loans are not limited to the size limit of conforming loans, like a jumbo loan, or the guidelines like government-backed loans, although lenders will have their own criteria.

You May Like: How To Negotiate Best Mortgage Rate

Private Mortgage Insurance :

Depending on the type of mortgage loan you choose and the amount of your down payment, you may need to pay private mortgage insurance. This insures the lender should a borrower discontinue making payments and default on their home loan. Depending on the type of loan you choose, youll pay PMI until your home equity reaches twenty percent or for the life of the loan.

What Is An Amortization Schedule

Initially, most of your payment goes toward the interest rather than the principal. The loan amortization schedule will show as the term of your loan progresses, a larger share of your payment goes toward paying down the principal until the loan is paid in full at the end of your term.

A mortgage amortization schedule is a table that lists each regular payment on a mortgage over time. A portion of each payment is applied toward the principal balance and interest, and the mortgage loan amortization schedule details how much will go toward each component of your mortgage payment.

Also Check: Does My Husband Have To Be On The Mortgage

How To Calculate Monthly Principal Payment

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like Ame

Personal Finance Insider writes about products, strategies, and tips to help you make smart decisions with your money. We may receive a small commission from our partners, like American Express, but our reporting and recommendations are always independent and objective. Terms apply to offers listed on this page. Read our editorial standards.

• You can calculate a monthly mortgage payment by hand, but it’s easier to use an online calculator.
• You’ll need to know your principal mortgage amount, annual or monthly interest rate, and loan term.
• Consider homeowners insurance, property taxes, and private mortgage insurance as well.

More often than not, a homeowner who borrowed money to buy a house is making one lump-sum monthly payment to their mortgage lender. But while it may be called the monthly mortgage payment, it includes more than just the cost of repaying their loan and interest.

For many of the millions of American homeowners carrying a mortgage, the monthly payment also includes private mortgage insurance, homeowners insurance, and property taxes.

It’s possible to estimate your total monthly payment by hand using a standard formula, but it’s often easier to use an online calculator. Either way, here’s what you’ll need:

How Lenders Decide How Much You Can Afford To Borrow

Mortgage lenders are required to assess your ability to repay the amount you want to borrow. A lot of factors go into that assessment, and the main one is debt-to-income ratio.

Your debt-to-income ratio is the percentage of pretax income that goes toward monthly debt payments, including the mortgage, car payments, student loans, minimum credit card payments and child support. Lenders look most favorably on debt-to-income ratios of 36% or less or a maximum of $1,800 a month on an income of $5,000 a month before taxes.

Read Also: How Do You Assume A Mortgage

How Does A Mortgage Work

A mortgage is a secured loan that is collateralized by the home it is financing. This means that the lender will have a lien on your home until the mortgage is paid in full. After closing, youll make monthly paymentswhich covers principal, interest, taxes and insurance. If you default on the mortgage, the bank will have the ability to foreclose on the property.

What Are The Cons Of Using An Interest

• If you dont pay on your principal during the initial interest-only period, you wont build equity in the property, though it may or may not increase in value with the market.
• Once the interest-only period expires, your monthly payment can go way up.
• While you could gain equity if your homes value increases , the opposite is true as well. If home prices plummet, you may owe more than your home is worth, which will work against you if you plan to refinance before the end of the interest-only term. You could be potentially be stuck with the house unless you can come up with the cash to make the difference between what you can sell the house for and the amount owed on the mortgage.

Learn more:

Dont Miss: 0 Interest On New Cars

You May Like: What Score Do Mortgage Lenders Use

Consider The Cost Of Property Taxes

A monthly mortgage payment will often include property taxes, which are collected by the lender and then put into a specific account, commonly called an escrow or impound account. At the end of the year, the taxes are paid to the government on the homeowners’ behalf.

How much you owe in property taxes will depend on local tax rates and the value of the home. Just like income taxes, the amount the lender estimates the homeowner will need to pay could be more or less than the actual amount owed. If the amount you pay into escrow isn’t enough to cover your taxes when they come due, you’ll have to pay the difference, and your mortgage payment will likely increase going forward.

You can typically find your property tax rate on your local government’s website.

Mortgage Payment Calculator With Taxes And Insurance

Use this PITI calculator to calculate your estimated mortgage payment. PITI is an acronym that stands for principal, interest, taxes and insurance. After inputting the cost of your annual property taxes and home insurance costs, youll see the full impact of your monthly payment on your household budget. Fill in the blanks and hit view report to see the payment schedule, which shows how much of your payment goes toward interest, and how much toward principal. Because the amount of interest is determined by the balance owed, over time the interest remitted with each payment decreases, with more of your monthly payment going toward principal.

Also Check: Should You Buy Down Mortgage Rate

Read Also: Which Way Are Mortgage Rates Trending

How To Calculate Monthly Mortgage Payment In Excel

For most of modern people, to calculate monthly mortgage payment has become a common job. In this article, I introduce the trick to calculating monthly mortgage payment in Excel for you.

Calculate monthly mortgage payment with formula

To calculate monthly mortgage payment, you need to list some information and data as below screenshot shown:

Then in the cell next to Payment per month , B5 for instance, enter this formula =PMT, press Enter key, the monthly mortgage payments has been displayed. See screenshot:

Tip:

1. In the formula, B2 is the annual interest rate, B4 is the number of payments per year, B5 is the total payments months, B1 is the loan amount, and you can change them as you need.

2. If you want to calculate the total loancost, you can use this formula =B6*B5, B6 is the payment per month, B5 is the total number of payments months, you can change as you need. See screenshot:

Read Also: 10 Year Treasury Yield Mortgage Rates

How Do I Manually Calculate House Payments

Related Articles

• Taxes on Proceeds of House

If you are in the market for a new place to call home, one of the most significant questions you are probably asking yourself is, Can I afford this? After all, with home prices soaring in the San Francisco area, committing to purchasing a home is a weighty decision that carries with it a series of long-term implications. That being said, it is possible to take a proactive approach toward your property search by learning how to manually calculate what your house payments would likely be if you purchased any one of your preferred properties. Fortunately, this can be accomplished relatively easily if you have the correct information on hand.

Recommended Reading: Does Rocket Mortgage Service Their Own Loans

Recommended Reading: How Much Is Average Mortgage A Month

How To Calculate Your Mortgage Payments

The calculus behind mortgage payments is complicated, but Bankrate’s Mortgage Calculator makes this math problem quick and easy.

First, next to the space labeled “Home price,” enter the price or the current value of your home .

In the “Down payment” section, type in the amount of your down payment or the amount of equity you have . A down payment is the cash you pay upfront for a home, and home equity is the value of the home, minus what you owe. You can enter either a dollar amount or the percentage of the purchase price you’re putting down.

Next, you’ll see Length of loan. Choose the term usually 30 years, but maybe 20, 15 or 10 and our calculator adjusts the repayment schedule.

Finally, in the “Interest rate” box, enter the rate you expect to pay. Our calculator defaults to the current average rate, but you can adjust the percentage. Your rate will vary depending on whether youre buying or refinancing.

As you enter these figures, a new amount for principal and interest will appear to the right. Bankrate’s calculator also estimates property taxes, homeowners insurance and homeowners association fees. You can edit these amounts or even ignore them as you’re shopping for a loan those costs might be rolled into your escrow payment, but they don’t affect your principal and interest as you explore your options.

Calculate Your Down Payment

Considering what to offer on a home? Change the home price in the loan calculator to see if going under or above the asking price still fits within your budget.

You can also use our mortgage payment calculator to see the impact of making a higher down payment. A higher down payment will lower your monthly payments not only because it reduces the amount of money you borrow, but also because it can help you qualify for a lower interest rate. In some cases, a down payment of at least 20% of the homes purchase price can help you avoid paying private mortgage insurance .

Ready to take the next step?

Shopping for a house is easier with a vetted professional on your side. Our Endorsed Local Providers are ready to help.

Dont Miss: Personal Loans With Lowest Interest Rates

Recommended Reading: How Does A Reverse Mortgage Work When The Owner Dies

Consider Other Monthly Costs

You can incorporate additional variable into this calculation by tweaking the equation slightly. If youre paying an up-front down payment, this will affect the P in your equation or the total amount of your loan.

Perhaps youre paying a 20% down payment in the very first month of your payment period. Using the same numbers as above, thats $16,000. Your equation will change to:

M= 80,000-16,000 /.

We simply adjusted P to account for the $16,000 that would be taken off after the down payment is made, and we also adjusted N , so that your monthly rate would begin after the initial down payment.

How Do I Calculate A Monthly House Payment For A 30

Related Articles

• What Are All My Monthly Fees for a House Loan?

Calculating a 30-year fixed-rate mortgage is a straightforward task. In order to find out what your monthly payments might be, you can use a mortgage formula or a calculator. This will give you a good estimation of whether you can afford the mortgage. Home loans are amortized over 30 years with monthly payments that are the same each month. As you begin to pay your mortgage, you will actually pay more in interest. Over time, as the loan decreases, more of your money goes toward the principal.

• Check your work with a mortgage calculator.

Warnings

• You should also add insurance and taxes on to your monthly payment.

Writer Bio

Read Also: What Documents Needed To Refinance Mortgage

Other Things That You Might Have To Pay For Monthly

Your mortgage payment consists of principal and interest . But you may have other monthly expenses. Consider all these additional costs in your monthly budget when deciding whether you can afford extra payments to pay down your mortgage principaland how much to pay.

PITI

The most common additional payments are taxes and insurance . Together, the payment is commonly called PITI.

Your lender will apply the principal and interest to your home loan and put the taxes and insurance payments in an escrow account. Then, your lender pays the tax bill and annual insurance premium out of escrow when they come due each year.

PMI

You need to budget private mortgage insurance if your down payment is less than 20% of the home price.

HOA fees

Homeowners association fees are also common monthly expenses for communities like condos or subdivisions.

How Do You Calculate A Loan Payment

The first step to calculating your monthly payment actually involves no math at all its identifying your loan type, which will determine your loan payment schedule. Are you taking out an interest-only loan or an amortized loan? Once you know, youll then be able to figure out the types of loan payment calculations youll need to make.

With interest-only loan options, you only pay interest for the first few years, and nothing on the principal balance the loan itself. While this does mean a smaller monthly payment, eventually youll be required to pay off the full loan in a lump sum or with a higher monthly payment. Most people choose these types of loan options for their mortgage to buy a more expensive property, have more cash flexibility, and to keep overall costs low if finances are tight.

The other kind of loan is an amortized loan. These loan options include both the interest and principal balance over a set length of time . In other words, an amortized loan term requires the borrower to make scheduled, periodic payments that are applied to both the principal and the interest. Any extra payments made on this loan will go toward the principal balance. Good examples of an amortized loan are an auto loan, a personal loan, a student loan, and a traditional fixed-rate mortgage.

Read Also: Rocket Mortgage Requirements

Don’t Miss: What Dti Is Needed For A Mortgage