Mortgage Calculator
Calculate your monthly mortgage payments and total interest over the loan term.
Mortgage Calculator
Calculate your monthly mortgage payments and total interest costs.
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Understanding Mortgage Calculations
A mortgage is a loan specifically used to purchase real estate. Understanding how mortgage payments are calculated can help you make informed decisions about your home purchase and financing options.
Key Mortgage Terms
- Principal: The initial amount borrowed from the lender
- Interest Rate: The percentage charged by the lender for borrowing the money
- Loan Term: The length of time to repay the loan (typically 15, 20, or 30 years)
- Down Payment: The initial upfront payment toward the home purchase
- Monthly Payment: The amount paid each month, including principal and interest
Types of Mortgages
- Fixed-Rate Mortgage: Interest rate remains the same for the entire loan term
- Adjustable-Rate Mortgage (ARM): Interest rate may change periodically based on market conditions
- FHA Loans: Government-backed loans with more flexible qualification requirements
- VA Loans: Mortgages for veterans and active military members
- Jumbo Loans: Mortgages that exceed the conforming loan limits
How Mortgage Payments Are Calculated
The mortgage payment formula is:
M = P [ r(1+r)^n / ((1+r)^n - 1) ]
Where:
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate divided by 12)
- n = Number of payments (loan term in years × 12)
Factors That Affect Your Mortgage Payment
- Loan Amount: Higher loan amounts result in higher monthly payments
- Interest Rate: Lower interest rates mean lower monthly payments
- Loan Term: Longer terms reduce monthly payments but increase total interest paid
- Down Payment: Larger down payments reduce the loan amount and monthly payments
- Property Taxes and Insurance: Often included in the monthly payment through escrow
Tips for Reducing Your Mortgage Costs
- Make a larger down payment to reduce the loan amount
- Shop around for the best interest rates from different lenders
- Consider a shorter loan term to pay less total interest
- Improve your credit score before applying for a mortgage
- Make extra payments toward the principal when possible
- Refinance when interest rates drop significantly
Note: The mortgage calculator provides estimates based on the information you provide. Actual loan terms and payments may vary based on lender requirements, credit history, and other factors. Always consult with a mortgage professional for personalized advice.