Before you take out a mortgage for a few hundred grand, it’s a good idea to see how much of your paycheck your monthly payment will take up. A typical mortgage payment applies a portion to interest and a portion to principal to gradually pay down your balance. Some lenders also require you to pay a portion of your property taxes and homeowner’s insurance premium each month. Lenders call this your PITI ("principal, interest, taxes and insurance") payment. You can add your monthly taxes and insurance to your principal and interest payment to determine your total house payment on your $300,000 loan.
Divide your loan’s annual interest rate by 12 to determine your monthly rate. For example, if your loan has a 7.5 percent interest rate, divide 7.5 percent, or 0.075, by 12 to get a monthly rate of 0.00625.
Multiply your loan term in years by 12 to determine the number of monthly payments. In this example, assume you have a 30-year mortgage. Multiply 30 by 12 to get 360 monthly payments.
Add 1 to your monthly rate. Raise your result by an exponent equal to the total number of monthly payments. In this example, add 1 to 0.00625 to get 1.00625. Raise 1.00625 to the 360th power to get 9.4215.
Multiply your result by your monthly rate. In this example, multiply 9.4215 by 0.00625 to get 0.05888.
Subtract 1 from your Step 3 result. In this example, subtract 1 from 9.4215 to get 8.4215.
Divide your Step 4 result by your Step 5 result. Multiply that result by your $300,000 loan amount to calculate your monthly principal and interest loan payment. In this example, divide 0.05888 by 8.4215 to get 0.00699. Multiply 0.00699 by $300,000 to get $2,097.
Add your annual property taxes to your annual homeowner’s insurance premium. Divide your result by 12 to determine your monthly taxes and insurance. You can contact the assessor’s office of the county in which your property is located to determine your property taxes, and contact different insurance providers to estimate your annual insurance premium. In this example, assume your annual property taxes are $3,100, and annual insurance is $1,000. Add these to get $4,100. Divide $4,100 by 12 to get $341.67 in monthly taxes and insurance.
Add your monthly taxes and insurance to your principal and interest payment to determine your monthly PITI house payment. Concluding the example, add $341.67 to $2,097 to get a PITI house payment of $2,438.67 on your $300,000 loan.
- If you have any other monthly housing costs, such as homeowners’ association dues, add those to your PITI payment.
- To calculate a house payment on a loan amount other than $300,000, substitute $300,000 for the loan amount in Step 6.
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