How to Calculate Your Monthly Mortgage Payment Manually

Filed in Articles by on January 31, 2024

Purchasers of genuine property use Mortgage, so do you want to know how to Calculate Your Monthly Mortgage Payment to purchase real estate or to raise funds for any other purpose? This information will give you all the methods to calculate.

Calculate Your Monthly Mortgage Payment

Before you hurdle into buying a home often the biggest purchase of your life, you need to know that you can have enough money for the monthly mortgage payment.

You could calculate the payment using a fast online calculator, but if you want to see how all the variables work hand in hand, you can do it by hand using the mortgage monthly payment formula.

The formula for calculating your mortgage monthly payment requires using proponents, so unless you can do those with your brain, you’ll need a calculator to assist.

How to Calculate Mortgage Payment Step by Step

How to Calculate Mortgage Payment Step by Step

Below are the following methods with their formula used to calculate Mortgage payments.

1. You Have to Understand the Equation

To calculate the monthly payment, we can rely on a relatively simple equation. You can represent the monthly payment equation:

{\displaystyle M=P{\frac {r (1+r) ^{n}}{ (1+r) ^{n}-1}}}.

These variables represent the following inputs:

M is your monthly payment.

P is your principal.

R is your monthly interest rate, calculated by dividing your annual interest rate by 12.

N is your number of payments (the number of months you will pay the loan)

2. Then Input Your Information into the Equation

You will need to input your principal, monthly interest rate, and the number of payments to find your monthly payment. However, you can easily find this information in your loan agreement or from a quoted loan estimate.

Check the information again to be sure of its accuracy before using it in calculations.

For example, imagine you have a $100,000 mortgage loan with 6 percent annual interest over 15 years.

Your input for “P” would be $100,000.

For “r,” you would use your monthly interest rate, which would be 0.06 (6 percent) divided by 12, or 0.005 (0.5 percent).

For “n” you would use your total number of payments, one for each month in fifteen years, which would be 12*15, or 180.

In this example, your complete equation would look like this:

{\displaystyle M=\$100,000{\frac {0.005 (1+0.005) ^{180}}{ (1+0.005) ^{180}-1}}}

3. Simplify Your Equation by Adding 1 to the “r.

Simplify your terms by doing the first step in the order of operations, which is adding the 1 and “r” inside the parentheses on the top and bottom of the equation.

This is a simple step that will make your equation look much less complicated. After this step, your sample equation would look like this:

{\displaystyle M=\$100,000{\frac {0.005 (1.005) ^{180}}{ (1.005) ^{180}-1}}}

4. Solve the exponents

Solve the exponents

The results inside the parentheses, (1+ r), from the previous step, must now be raised to the power of “n.” Again, this “n” represents the total number of payments.

This step requires a calculator with an exponent function, which is usually represented like this:{\display style x^{y}} This is done by entering the value to be raised, (1.005) in the example equation.

Then press the exponent button, enter your value for “n” and press enter or =. In the example, the result comes out as 2.454.

If you don’t have such a calculator, type your values from the last equation into Google followed by ^ (n) while replacing the “n” in parentheses with your value for “n.” The search engine will calculate this value for you.

Keep in mind that only the figures inside the parentheses will be raised to this power, not the “r” outside of them (at the front) or the -1 at the end of the equation.

After this step the sample equation would look like this:{\display style M=\$100,000{\frac {0.005 (2.454)}{2.454-1}}}

5. Simplify again

Here, you should multiply “r” times the result of the last step on the top (the numerator) and subtract 1 from your result on the bottom (the denominator).

The same equation would look like this after this step:{\display style M=\$100,000{\frac {0.01227}{1.454}}}

6. Divide the numerator by the denominator

This means dividing the top part of the equation by the bottom part of the equation. This should leave you with a small decimal.

In the example, your equation would now be:{\display style M=\$100,000* (0.008439)}

7. Multiply “P” by this result.

This will give you your monthly loan payment. In the example, this would be ($100,000)* (0.008439), or $843.90. This represents your monthly payment.

Summmarily, the listed processes are how to calculate your monthly mortgage payment by hand. So if you want to calculate your mortgage the above processes will serve as a guide.

CSN Team

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