Now let’s complete the equation by replacing the variables in the formula with the inputs: Keeping with the example used above, let’s say you have enough saved for a 20% down payment ($120,000) on a $600,000 home, amortized over 25 years at a rate of 2.69%. Calculate the remaining multiplications and divisions.An exponent represents a series of multiplications. Calculate the parentheses first (don’t forget the rules of PEMDAS from school: parenthesis, exponents, multiplication, division, addition, then subtraction), starting with the parentheses within the parentheses.Note, you’ll want to follow the same sequence of calculations as we do in order to get the correct result. Simply swap out the variables with your own inputs and complete the calculation. For simplicity, we’ve attributed a symbol for each of the three inputs used in the formula. Now that you have those three numbers in hand-your mortgage principal, your monthly interest rate and your number of payment periods-complete the formula below. I'm buying a home I'm renewing/refinancing You will be leaving MoneySense. Monthly interest rate = annual interest (%) / 100 / 12 months Note: To make life easy (and the numbers less cumbersome), we’ve rounded to five decimals. This leaves you with a monthly interest rate of 0.00224. Then, you’ll need to divide the result by 12. To avoid ending up with a number that’s far greater than it should be, you’ll need to convert the percentage into a decimal by dividing the number by 100. (Remember: This will help you figure out how much you will pay every month for bi-weekly payments, this formula doesn’t work.)įor example, let’s say you’re offered a mortgage rate of 2.69%. This means you’ll have to divide the quoted rate by 12 to determine your monthly interest rate, before inputting it into the mortgage payment formula. Lenders like to use annual interest rates in their mortgage contracts. The monthly interest rate on your mortgage Mortgage principal = purchase price – down payment When you make your regular mortgage payments, part of the money goes towards the principal and part of it goes towards paying interest on the loan. For example, a down payment of $120,000 on a $600,000 home would leave you with $480,000 in mortgage principal. To determine your mortgage principal-the outstanding balance on the amount that you borrowed-subtract the down payment from the total purchase price of the home. ![]() This refers to the total amount that you borrowed. ![]() Keep in mind that this formula will only calculate your monthly mortgage payment-bi-weekly or accelerated bi-weekly payments, for example, would be calculated differently. The three pieces of info you’ll need to know are: 1. Also, have three pieces key of information ready, since you’ll need to plug them into the mortgage payment formula (below). ![]() To get started, you’ll need a regular calculator, since we’ll be crunching numbers. What you’ll need to calculate your mortgage payments Whatever your reason, read on to see how to calculate your mortgage payments yourself-no mortgage calculator required. Maybe you’d like to run the numbers the ol’ fashioned way with a pen and paper (or the calculator app on your phone), or maybe you’d just like a better understanding how the number that your monthly budget likely revolves around is determined. Just close the tab to return.īut have you ever wondered how mortgage payment calculators work? We break down the math to help illustrate why you end up with that specific payment amount.
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