Figure Monthly Mortgage Payment

To figure monthly mortgage payment the old-fashioned way (by hand and mental prowess), you will need the same factors and numbers as you would for a mortgage calculator. The difference is the calculator will perform the mathematical equation for you.

Understanding Amortization Tables

The factors you will need in order to calculate monthly mortgage payments include:

• The loan amount (purchase price less down payment)
• The interest rate
• The years the loan will be amortized for
• The market value of your home (if refinancing)
• The total amount of other debt included in the loan, if the loan is a cash-out refinance

The standard mortgage formula is: M = P [ i(1 + i)n ] / [ (1 + i)n - 1]

M is the monthly payment i = r/12 (interest equals rate divided by 12) n = total number of payments (For example 15 years X 12 months per year, equals 180 payments)

For a $100,000 loan at 15 years, with interest rate of 5% (compounded monthly), you would have:

Solve for i first. i = 0.05 / 12 = 0.004167

Solve for n = 180 monthly payments

Solve for (1 + i)n = (1.004167)180 (If using a standard calculator, use the xy key) and it equals 2.11383

Now you have filled in most of it:

M = P [ i(2.11383)] / [ 2.11383- 1]

Solve further M = P [.004167 x 2.11383] / 1.11383 or

M = $100,000 x 0.00790 =

$790.81

It is easier to use the mortgage calculator rather than to plug in these numbers manually, but it helps to understand the math and logic behind the calculations.

The mortgage payment does not only consist of principal and interest. It also consists of taxes and insurance. The mortgage payment is a combination of these factors:

• Principal
• Interest
• Taxes
• Insurance

Of these factors, the taxes and insurance can only be estimated, so don't expect an exact figure. Referred to altogether as PITI, the calculation should give you a relatively firm idea of what your overall payment will actually be.

Also, taxes and insurance may change as time goes by, so it is impossible to pinpoint them with accuracy. There are exceptions to this rule, however. If you are going to be paying your own taxes and insurance, then these would not be calculated in the mortgage payment; your payment would be P&I only. In the event you have an interest-only loan, you will pay only interest for a period of time, before the principal is factored in.

To use the mortgage calculator, you take the same factors you would use if you were doing it by hand, and simply plug them into the calculator when prompted. You can find a calculator for most any purpose. There are calculators which will estimate your tax and insurance for you based on the zip code of the property in question. These will be average figures based on the prevailing rates. There are also calculators that will help you decide between points and a down payment to find out which is most financially advantageous for you. There are calculators designed specifically for balloon mortgages, refinancing, ARMs, fixed rate mortgages, and other types of mortgage loans. You may also use a house affordability calculator. Here are links to mortgage calculators that are available free online:

1. Bankrate.com
2. Mortgage Calculator.org
3. Mortgage X.com
4. Interest.com
5. Microsoft offers templates for it's Excel spreadsheet program to help you amortize your loan. You can download them free to your computer. They also offer templates for loan calculators to help you figure mortgage payments.

Amortization is the process of paying off a debt over a specific period of time, using regular payments (usually monthly). A part of every payment is for interest while the remainder is applied on the principal balance. You will be able to see at a glance the percentage of interest and the percentage of principal in each payment in an amortization schedule. Amortization calculators can help you figure your payments and interest very quickly for the life of the loan.

By whatever means you figure monthly mortgage payment, you will find that the results are different depending upon which type of mortgage you have. Today, there are many to choose from, such as:

• Adjustable Rate: ARM is the opposite of fixed rate. It means the interest rate is adjustable, or it will fluctuate over the life of the loan depending upon the prevailing interest rates.
• Fixed Rate: Interest rate remains the same throughout the entire term.
• Fixed Rate Refinance
• ARM Refinance
• Balloon Mortgage: Smaller payments at the beginning with one big final payment at the end. Most people refinance before the final balloon payment comes due.
• FHA Loans

There are many more mortgages as well. Your monthly mortgage payment will also be dependent upon your credit rating. Banks reserve the lowest interest rates for the best credit scores. If your credit rating is not so perfect, you will likely be required to have a higher interest rate.

Your banker or mortgage broker will be able to help you arrive at the most accurate figures based upon your unique factors. Be sure to ask plenty of questions as you set about buying a home.

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