How To Calculate Mortgage

Need to know how to calculate mortgage? There are multiple mortgage calculators online able to instantly calculate and spit out  the amount of any mortgage payment. But if you would rather rely on concrete numbers rather than the magical computer device, roll up your sleeves- we might be here a while. Mortgage payments are calculated by a standard mortgage formula. Let’s break down the variables needed to perform the calculation using a $100,000 15 year mortgage at five percent interest.

To calculate a mortgage payment, you will need:

• A pencil
• Note Paper
• Calculator

1. Write down the standard mortgage formula.
   

   M = P [ i(1 + i)ⁿ ] / [ (1 + i)ⁿ - 1]

2. Understand the definition of each variable needed to calculate the mortgage payment.
   "M" stands for the monthly mortgage payment. "i" represents the loans monthly interest and P is the principle left on the loan.

3. Plug in your loan information into the formula.

4. Solve for "i" first. For example a 15 year $100,000 mortgage with five percent interest calculate: i = 0.05 / 12 = 0.004167 and n as 12 x 15 = 180 monthly payments

5. Solve (1 + i)ⁿ = (1.004167)¹⁸⁰ by using the x^y key on a calculator to get 2.11383

6. Complete calculations.  M = P [ i(2.11383)] / [ 2.11383- 1] which is simply:

   M = P [.004167 x 2.11383] / 1.11383 or

   M = $100,000 x 0.00790 = $790.81

Tip:

Find out how much interest you have paid the bank so far by multiplying the amount of the monthly payments by the number of payments and subtract  the principal.