The formula for calculating a fixed-rate payment is more straightforward than it looks and can be done with a personal calculator or with any number of free mortgage calculators on the Internet. The formula is the same, whether the mortgage is for 15 years or for 30. Only the numbers you plug into it will change. The full formula for a fixed rate loan is (r / (1 - (1 + r) ^ -n)) * p = monthly mortgage payments; r is the monthly interest rate and n is number of payments over the life of the loan.
Compute the monthly interest rate by dividing the annual percentage rate (APR) by 100 to change it to a decimal, then divide the result by 12. Let's say you want to borrow $300,000 and have been offered an interest rate of 4 percent: 4 divided by 100 divided by 12 equals .0033.
Calculate the number of payments you would make over 15 years: 15 times 12 equals 180.
Compute the loan specific variable (1 - (1 + r) ^ -n). In our example, 1 minus [(1 plus .0033) to the power of -180] equals .447
Divide the monthly rate by the variable you just computed and multiply the result by the amount of money you want to borrow. In our example: $300,000 times (.0033 divided by .447) equals a monthly payment of $2,215.
Go to one of the online mortgage calculators (see Resources) and enter the amount you want to borrow with the interest rate and a term of 15 years. In our example, the result is $2,219. The $4 difference between this and our manual computation is the result of rounding off numbers in the lengthy decimal results of the latter. The online calculator keeps the whole decimal string.
Billie Jo Jannen is a politics and lifestyle columnist in rural San Diego County and a senior copy editor for Demand Media. Her writing and editing career spans 23 years, and she specializes in border and environmental affairs. Jannen's eclectic education includes engineering and horticulture, and she represents the Rural Economic Action League in regional economic development planning.