# How to Manually Calculate a Mortgage | Finance

Before you jump in to buying a home – often the largest purchase of your life – you need to know that you can afford the monthly mortgage payment. You could calculate the payment using a quick online calculator, but if you want to see how all of the variables work together, you can do it by hand using the mortgage monthly payment formula.

The formula for calculating your mortgage monthly payment requires using exponents, so unless you can do those in your head, you’ll need a calculator to help. When it comes to budgeting for your new home, remember that the mortgage payment is only one cost. You’ll also need to budget for additional expenses like property taxes, homeowner’s insurance, homeowner’s association fees and home maintenance.

### Tip

The formula for calculating a monthly mortgage payment incorporates the amount you are borrowing, your assigned interest rate, and the length of your mortgage repayment plan.

## Factors Affecting Mortgage Monthly Payment

The amount of a mortgage monthly payment is affected by three factors: how much you borrow, your mortgage interest rate and the length of your mortgage. The more you borrow, the higher your monthly payment. Similarly, the higher the interest rate, the larger each monthly payment will be. If the mortgage rate changes during the life of the mortgage, such as with an adjustable rate mortgage, you’ll have to recalculate the monthly payments at that time. Finally, the longer the term of your mortgage, the lower your monthly payment. However, with a longer term, you will pay more interest over the life of the mortgage.

Read about:   Ally home loans review: Online application, \$500 toward closing costs

To figure your mortgage payment, start by converting your annual interest rate to a monthly interest rate by dividing by 12. Next, add 1 to the monthly rate. Third, multiply the number of years in the term of the mortgage by 12 to calculate the number of monthly payments you’ll make. Fourth, raise the result of 1 plus the monthly rate to the negative power of the number of monthly payments you’ll make. Fifth, subtract that result from 1. Sixth, divide the monthly rate by the result. Last, multiple the result by the amount you borrowed.

For example, say you borrowed \$265,000 on a 15-year mortgage at 4.32 percent. Start by dividing 0.0432 by 12 to find that the monthly rate equals 0.0036. Next, add 1 to 0.0036 to get 1.0036. Third, multiply 15 years by 12 payments per year to find that your loan consists of 180 monthly payments. Fourth, raise 1.0036 to the negative 180th power to get 0.5237. Fifth, subtract 0.5237 from 1 to get 0.4763. Sixth, divide 0.0036 by 0.4763 to get 0.00755826. Finally, multiply 0.00755826 by \$265,000 to find your monthly payment will be \$2,002.93.

## 9 thoughts on “How to Manually Calculate a Mortgage | Finance”

1. Antione Ullmann says:

My programmer is trying to convince me to move to .net from PHP. I have always disliked the idea because of the expenses. But he’s tryiong none the less. I’ve been using WordPress on a variety of websites for about a year and am worried about switching to another platform. I have heard great things about blogengine.net. Is there a way I can import all my wordpress content into it? Any help would be greatly appreciated!

2. David Simoson says:

Aw, this was an extremely good post. Taking a few minutes and actual effort to create a great article… but what can I say… I procrastinate a lot and don’t seem to get anything done.

3. Lin Niccoli says:

Spot on with this write-up, I truly believe that this website needs a lot more attention. I’ll probably be back again to see more, thanks for the advice!

4. Joy Tutwiler says:

You should be a part of a contest for one of the highest quality websites on the web. I’m going to highly recommend this site!

5. Damien Otsuka says:

I love your wordpress template, wherever do you down load it from?

6. Jude Mondello says:

Howdy I am so grateful I found your website, I really found you by accident, while I was looking on Bing for something else, Anyhow I am here now and would just like to say kudos for a fantastic post and a all round entertaining blog (I also love the theme/design), I don’t have time to read it all at the moment but I have bookmarked it and also added in your RSS feeds, so when I have time I will be back to read more, Please do keep up the fantastic job.

7. Marquis Sagendorf says:

Hmm is anyone else having problems with the pictures on this blog loading? I’m trying to find out if its a problem on my end or if it’s the blog. Any suggestions would be greatly appreciated.