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Figuring out how much you’ll pay for your mortgage is a key step in the home-buying process — and will help you determine how much debt you’ll be able to take on responsibly.
To get your monthly payment estimate, enter the home price, length of the loan, interest rate, and your down payment. You can also account for other costs, like homeowners association fees, homeowners insurance, and property taxes.
By adjusting the various inputs, you can also see how a change in one factor — such as the term of your loan or a lower interest rate — will affect your monthly payments. And if you’ve already got a mortgage, this tool can also help you decide if it’s a good idea to refinance.
How Do I Calculate My Mortgage Payment?
If you prefer to do a little math yourself, you can use a paper and pencil to calculate your mortgage payment with this equation:
M = P[r(1+r)^n/((1+r)^n)-1)]
Here’s what that all means:
M = Mortgage payment
P = Principal amount or dollar value of your loan
r = Monthly interest rate (to get the right number, take your annual interest rate and divide it by 12)
n = Number of payments over the life of your loan (multiply the years on your mortgage by 12 to get the number of monthly payments you’ll make)
How Can a Mortgage Calculator Help Me?
A mortgage loan calculator is a great place to start your home-buying process because it can help you determine your budget. But it’s a useful tool for more than just that. It can also help you determine what type of loan is a good fit for you.
Some conventional loans have smaller down payment requirements — as little as 3% down. But there are ongoing costs associated with paying less up front. If you put down less than 20%, meaning your loan-to-value ratio (LTV) is over 80%, you will be required to pay for private mortgage insurance. And with less skin in the game, you may pay a higher interest rate, too. Our mortgage payment calculator can help you weigh the benefit of putting down a higher down payment.
Understanding Your Mortgage Payment
Your mortgage payment isn’t just what you pay toward your principal loan balance each month. It also includes interest, taxes, and homeowners insurance. There are also other costs that could get tacked on, depending on what type of loan you have or how much you put toward a down payment. Mortgage insurance is an extra expense you’ll pay on some government-backed loans and on most conventional loans when your LTV is less than 80%. This insurance typically costs 0.5 and 1% of the loan amount every year, so it can add a lot to your monthly payments.
Outside of your mortgage payment, homeowners also have other expenses to account for, like homeowners association dues. You’ll also want to set aside funds for regular maintenance and unexpected home repairs. You may even be on the hook for higher utilities, compared to renting, if your rent included water, sewer, and trash.