How do you calculate a home mortgage?

Answer 1

There are many mortgage calculators that you can use online. Generally, you need to take the price of your home and the interest rate on your loan, as well as the length of your mortgage. Plug these number into a mortgage calculator and you can find your estimated monthly payment.

The explanation and formula for calculating your monthly mortgage payment is:

M = P * (i / (1 - (1+i)^-T))

M - is the monthly payment

P - is the principle

i - is the monthly interest

T - is the term

First convert your interest (i) to a decimal

3% interest / 100 = .03 Then divide .03 by 12 months = .0025

M = P * (0.0025 / (1 - (1+0.0025)^-T))

(1+0.0025) = 1.0025

M = P * (0.0025 / (1 - (1.0025)^-T))

Next add in your Term, in this case it is 30 years (30x12=360 months)

T=360

M = P * (0.0025 / (1 - (1.0025)^-360))

1.0025 to the -360 power. For this you need to turn the negative exponent to a positive exponent, which means fractions!

1

--------------- = 0.40703

1.0025(360)

M = P * (0.0025 / (1 -0.40703))

(1 -0.40703) = 0.59297

M = P * (0.0025 / 0.59297)

(0.0025 / 0.59297) = 0.00422

M = P * (0.00422)

P is the Principle, or the total amount that you are borrowing.

In this case P = $250,000

M= $250,000 * 0.00422

M = $1055

So the monthly payment would be $1,055