How to Calculate Monthly Mortgage Payment
Introduction
Buying a home is one of the biggest financial decisions most Americans will ever make. Understanding how to calculate your monthly mortgage payments can save you stress and help you plan better.
What Makes Up a Mortgage Payment?
- Principal: The amount you borrowed.
- Interest: The cost of borrowing money.
- Taxes: Property taxes owed to your local government.
- Insurance: Homeowner’s insurance (and sometimes mortgage insurance).
The Formula for Monthly Payments
The standard mortgage formula is:
PMT = P × [ r(1+r)^n ] / [ (1+r)^n – 1 ]
- P = loan amount
- r = monthly interest rate
- n = number of monthly payments
Example Calculation
If you borrow $300,000 for 30 years at 6% interest:
- Monthly payment = about $1,799 (principal + interest only).
- Add taxes and insurance, it might rise to around $2,200.
Why Calculators Help
Manual math can be complex. Online mortgage calculators make it easy to estimate your monthly costs.
Tips for Managing Mortgage Payments
- Shop around for the best interest rates.
- Make extra payments if possible.
- Understand PMI (private mortgage insurance).
Sources
Disclaimer: This article is for educational purposes only and does not constitute financial advice.