Financial calculators online make it simple and fast to find out how much you'll pay your new mortgage lender each month. But if you're the type of person who likes to understand the why and how behind certain matters, learn how to manually calculate your mortgage payment in a few quick steps.
Determine the amount borrowed (called the principal), the interest rate, the length of the mortgage in months. In this example assume a principal amount of $100,000 and interest rate of 5 percent (expressed as 0.05 for calculating purposes) on a 15-year mortgage (180 months).
Assign the letter "B" to the amount borrowed, "r" to the interest rate, "m" to the length of the loan in months and "P" to the monthly payment amount. Insert your mortgage figures into the mortgage payment formula, which is P = B[(r/12)(1 + r/12)^m]/[(1 + r/12)^m - 1]. Write the formula and your variables (principal, rate, and mortgage term) on a sheet of paper to make the process simpler to follow.
Fill in the "blanks" of your mortgage formula to determine the monthly payment. The filled formula in this instance is P=100000[(0.05/12)(1+0.05/12)^180]/[(1+0.05/12)^180 – 1]. The resulting monthly payment for this mortgage you're considering ("P") is $790.79.