Simple Mortgage Calculator
Understanding the Mortgage Payment Formula
When you calculate your monthly mortgage payment, it's more than just dividing your loan amount by the number of months. Your payment includes principal, interest, and often additional costs like taxes, insurance, and HOA fees. Here's how the formula works and how our calculator breaks it down for you.
M = P × [ r(1 + r)^n / ((1 + r)^n – 1) ]
Where:
M = Total monthly mortgage payment (principal + interest)
P = Principal loan amount (the amount you borrow)
r = Monthly interest rate (annual rate ÷ 12)
n = Total no. of monthly payments (loan term in years × 12)
Example:
For a 30-year loan at 4% interest on $250,000:
P = $250,000
r = 0.04 ÷ 12 = 0.00333
n = 30 × 12 = 360
Plugging into the formula gives your base principal and interest payment.
Loan Details You Enter:
Loan Type & Term: Conventional, FHA, VA, etc.
Property Price & Down Payment: Determines your principal amount.
Interest Rate: Impacts your monthly interest cost.
Monthly Payment Breakdown:
Principal & Interest: Core loan repayment based on the formula above.
Taxes & HOA: Local property taxes and any homeowner association fees.
Hazard Insurance: Protects your home against risks like fire or theft.
Mortgage Insurance (PMI): Applies if your down payment is less than 20%.
Note: Do not put the info in an accordion for this section as some of it is repetitive but still serves a purpose in understanding the formula
Understand Your Mortgage Components
Protects your home against risks like fire or theft included in monthly escrow.
Local property taxes divided into monthly payments.
Fees for community amenities and maintenance.
Core loan repayment and interest charges.
Required by lenders to protect against property damage.
Applies if down payment < 20%; protects lender in case of default.
