How to Calculate Monthly Payments for Mortgages

Whether you already have a mortgage or are taking one out, you will often want to know what your monthly payment will be with a certain amount of principal and a particular interest rate. You can do this calculation by using a mortgage interest rate factor table, a spreadsheet program to do the math for you or an online mortgage payment calculator.

TL;DR (Too Long; Didn't Read)

Monthly mortgage payments depend on your interest rate and principal. Use a table of monthly payments per $1,000 of principal to estimate what you'll owe.

Mortgage Interest and Principal

The amount of money that you borrow on a mortgage loan or any other type of loan is called the loan principal. Of course, if you simply paid back the principal over time, the lender would make no money. That's why loans charge interest, which is proportional to the amount that you borrowed in the first place. Mortgage loans typically are issued for a fixed length of time, such as 15 years or 30 years. With a fixed rate mortgage, you generally pay a fixed amount each month. When the mortgage is new, you will be paying more in interest since there is more principal to which interest is applied.

How much you pay each month essentially depends on two factors: how much you borrowed and at what interest rate. If you borrowed more or borrowed at a higher rate, you'll find yourself making a larger mortgage payment each month.

Some mortgages are variable rate or adjustable rate mortgages. With these, your interest rate will change over time, meaning your monthly payments can go up and down over the life of the loan. Other mortgages may have other special terms that can affect your monthly payments.

Cost Per $1,000 Mortgage Chart

When you're taking out a new loan, refinancing an old one or figuring out what could happen under various interest rate scenarios with an adjustable rate loan, you'll usually want to compute what your monthly payment will be. To do this, you can use a chart that shows your monthly payment per $1,000 of borrowed money at various interest rates and loan lengths.

For example, a chart would show that if you borrowed money at 2 percent interest, generally considered an excellent rate, you would pay $6.43 per $1,000 per month on a 15-year mortgage or $3.69 per $1,000 per month on a 30-year loan. So if you borrowed $200,000, you would pay 200 * $6.43 = $1,286 per month on the 15-year loan or $3.69 * 200 = $738 on the 30-year loan. The number you multiply by your loan amount is sometimes called a mortgage payment factor.

You can find these charts online at various financial news and information sites as well as some banking sites. Don't forget there can be other costs related to buying a house and taking out a mortgage, such as closing costs and legal fees as well as other recurring costs like homeowner's insurance and property tax. You'll also need to budget for maintenance on your home.

Using a Mortgage Payment Calculator

You can use an online mortgage payment calculator to view your loan payments under various scenarios. Many of these are available from financial sites, such as Credit Karma and Bankrate.

Enter information like your loan term, interest rate and loan amount to find out how much you will owe. You'll usually be able to adjust the numbers to compare different loan options as you consider what you can afford to borrow or how much you wish to borrow.

Using a Spreadsheet Program

If you prefer, you can download premade spreadsheets that you can use with programs like Microsoft Excel to compute your mortgage payments under various scenarios. These work similarly to the online calculator tools. Find such a spreadsheet from a source you trust and plug in the relevant numbers to see what you'd owe.

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