How To Calculate Monthly Payment On A Loan Formula Understanding Monthly Payment Mortgage Calculators

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Understanding Monthly Payment Mortgage Calculators

Calculating your monthly mortgage payment is the most basic method of calculating mortgage terms. You can apply the same calculation to loans. That’s why a monthly mortgage payment calculator is also called a loan payment calculator. To be safe, make sure you stay below forty percent of your net income. For example, 40% of $4,000 comes to a $1,440 mortgage payment.

Here is the mortgage payment formula:

payment = [P(1 + r)n r]/[(1 + r)n – 1]

Here are the funds you need:

– P stands for loan amount.

– r means interest rate. To find the rate divide the interest by twelve months, since there are twelve months in a year.

– n means the number of charges. Basically, multiply the number of years by twelve months.

Let’s say you want to know the 30-month mortgage payment for a $100,000 mortgage at 7% interest. The rate equals .00583 which is interest divided by twelve months, while the number of payments equals 360 (30 years X 12 months). You pay $665 in monthly mortgage payments per month.

Here is the actual count:

The payment is equal [$100,000(1 + .00583)360 x 0.00583] / [(1 + 0 .00583)360 – 1]. Your monthly mortgage payment comes to $665.30. By the way, 360 is the exponent.

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