How to Calculate Your Mortgage Payment
A mortgage calculator helps you determine your monthly payment based on the home price, down payment, interest rate, and loan term. The formula used is M = P[r(1+r)^n]/[(1+r)^n-1], where P is the principal (loan amount), r is the monthly interest rate, and n is the number of payments. Understanding your mortgage payment is crucial for budgeting and financial planning.
Your monthly payment includes principal and interest, though most mortgages also require property tax and insurance payments. The total interest paid over the life of the loan can be substantial - often exceeding the original loan amount for 30-year mortgages. Making a larger down payment reduces your loan amount and can help you avoid private mortgage insurance (PMI).
Interest rates significantly impact your monthly payment and total cost. Even a 0.5% difference in rate can save tens of thousands of dollars over 30 years. Consider different loan terms: 15-year mortgages have higher monthly payments but much lower total interest. Use this calculator to compare scenarios and find the right balance for your budget.
Quick Tips
- Always compare APR, not just interest rates
- Use the Rule of 72 to estimate doubling time
- Extra payments dramatically reduce total interest
Frequently Asked Questions
A mortgage payment typically includes principal (loan repayment), interest, property taxes, homeowners insurance, and potentially PMI if your down payment is less than 20%.
A larger down payment reduces your loan amount, lowering monthly payments and total interest. It can also help you avoid PMI and potentially secure better interest rates.
A 15-year mortgage has higher monthly payments but significantly lower total interest. Choose based on your budget and financial goals - 30-year offers flexibility, 15-year builds equity faster.
Most lenders require a minimum credit score of 620 for conventional loans. FHA loans may accept scores as low as 580. Higher scores typically qualify for better interest rates.
Yes, most mortgages allow early payoff without penalties. Extra payments toward principal can save thousands in interest and shorten your loan term significantly.