Calculate Mortgage Payments Formula

How can you calculate mortgage payments in a formula? Do you need a special calculator? Do you have to be a math whiz? There are easy ways to help you calculate mortgage payments using a simple formula or by using a pre-loaded Microsoft Excel mortgage amortization spreadsheet.

Figure Your House Payment!

You don’t have to have a mortgage calculator to figure out what mortgage payments will be. In fact, knowing this simple formula can help you when house shopping, especially if you have a good idea of what interest rate range you’ll be in.

The standard mortgage formula is this:

M = P [ i(1 + i)n ] / [ (1 + i)n - 1]

Before you think you don’t understand, by using a regular calculator, you can find out what your mortgage payments will be.

First, what do all those letters and numbers stand for?

Before you can determine your monthly payment, you’ll need some figures:

• The amount of the mortgage or the amount you want to borrow, in this example it is $100,000.
• The interest rate the financial institution or bank is charging, in this example is five percent.
• The term or number of years of the loan, in this example is fifteen years.

Next, use these steps to find your monthly payment: Figure out the amount of interest you’ll pay first:

I, or interest, is 5% or .05 divided by 12 equals 0.004167 and (n) negative power as 12 times 15 equals 180 payments.

Next, in the formula above, figure (1 + i)n

Using the example of 0.004167, the calculation would be: 1 plus 0.004167 now equals 1.004167 with 180 to the negative power resulting in 2.11383.

Now the calculation looks like this: M = P [ i(2.11383)] / [ 2.11383- 1] which simplifies to M = P [.004167 x 2.11383] / 1.11383 or M = $100,000 x 0.00790 = $790.81 Note the –1 is calculated here. With this easy calculate mortgage payment formula the monthly payment is $790.81.

If you want to know how much interest you’ll pay over the term of the loan, all you need to do multiply the amount of your monthly payment times the term of the loan and then subtract the principal:

$790.81 times 180 payments (15 years) equals $142,345.80 minus the loan principal of $100,000 equals $42,345.80.

You can utilize a loan calculation template from Microsoft Excel to calculate your mortgage payments. Docstoc.com, a free file sharing website, offers a Microsoft Excel loan amortization template that’s easy to use. If calculating on your own doesn’t appeal to you, download the loan amortization template and just plug in the numbers. Docstoc.com requires free registration by providing an email address and password.

Many online mortgage companies offer ways to calculate mortgage payments in formulas already provided:

• BankRate offers a calculator as well as mortgage tips and advice.
• Yahoo Real Estate has a similar loan amortization calculator as well as popular mortgage how to guides.
• Arsidian LLC not only calculates your monthly payment but provides an amortization schedule for the term of your loan. You can see how much interest you pay by month, year, or entire term of loan.

Learning how to master the calculate mortgage payment formula is not difficult, however, modern Internet browsing can do the work for you. If you love math or just want to see if you can do it on your own, use the easy steps above and discover your mortgage monthly payment.

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