How Do I Calculate My Monthly Mortgage Payment?

By Stock Research Pro • May 30th, 2009

A mortgage is a loan from a bank or other source to cover the difference between the cash you have available and the agreed-upon purchase price for a piece of real estate. The monthly payments you make on a mortgage consist of the interest and principal and continue until the entire loan balance is repaid to the lender. While there are a number of options available to home buyers in choosing a mortgage, the most popular option is a fixed-rate mortgage.

What is a Fixed-Rate Mortgage?

Fixed-rate mortgages are typically issued for 15 or 30 year periods and have interest rates that do not change over the life of the loan. Different banks may offer different interest rates at any given time, but all fixed-rate mortgages enable the borrower to lock into an interest rate. Because the interest rate for a fixed-rate mortgage does not change over time, the monthly payment remains the same for the duration of the loan. Fixed-rate mortgages are not entirely without risk, however, as interest rates may fall significantly during the life of your mortgage (in which case you might choose to refinance, but there can be significant costs and restrictions associated with refinancing a mortgage).

Qualifying for a mortgage loan

How is the Monthly Mortgage Payment Calculated?

The monthly payment on a fixed-rate mortgage may include more than just the payments on the loan. If, for example, your down payment was less than 20%, you will also pay Private Mortgage Insurance. You will also be responsible for taxes and insurance as a home owner. That said, the primary factors in calculating your monthly mortgage payment include the interest rate, the length of time for the loan, and the amount borrowed.

To Use the Calculator Below

(1) Enter the annual interest rate for the loan
(2) Enter the number of years for the loan
(3) Enter the total amount you are borrowing

Prepayment Option

Over the life of the loan, the interest you pay can bring the total amount you pay for the property much higher than the agreed-upon purchase price. Fixed-rate mortgages often give the borrower the opportunity to prepay the principal early without a penalty. Any early payments you make against the principal will reduce the total cost of the loan and will decrease the amount of time you need to pay off your mortgage.


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

delicious | digg | reddit | facebook | technorati | stumbleupon | chatintamil

Leave a Comment

You must be logged in to post a comment.

« Calculate and Interpret the PEG Ratio | Home | The Decision to Refinance Your Mortgage (includes calculator) »