How to Calculate Mortgage Payments Including Tax & Insurance

Taxes and insurance boost total monthly house payments.
i Martin Poole/Lifesize/Getty Images

Monthly mortgage costs include more than just repaying the loan principal. Interest, taxes and insurance must be taken into consideration to get a clearer picture of the total cost of the house payments. Knowing how to calculate mortgage payments including tax and insurance can help you to determine the ideal mortgage amount for your unique financial situation.

Step 1

Divide your annual property tax insurance by 12 to determine the monthly tax amount. Although you will likely pay taxes annually, biannually or quarterly, it is helpful to determine the amount that can be attributed to each month. Set aside your monthly tax amount if your bank does not include property taxes in your mortgage payment.

Step 2

Check your most recent insurance policy statement to determine your monthly mortgage insurance premium. If you pay your insurance annually, divide the premium by 12 to calculate the monthly premium amount. If you pay biannually, divide the premium by six.

Step 3

Multiply the number of years in your mortgage term by 12 to determine the number of monthly payment periods in the loan. Divide the total mortgage principal by the number of monthly payment periods to find your monthly principal payment amount.

For example, if you take out a 20-year mortgage, you will have 240 monthly payment periods. If you took out a $200,000 mortgage, your monthly principal repayments would come in at around $833.

Step 4

Divide your annual interest rate by 12 to calculate your monthly interest rate. For example, if your annual interest rate is 6 percent, your monthly rate would be 0.5 percent.

Step 5

For each payment period, multiply the mortgage interest rate by the total amount outstanding, then add the product to the total amount to find new amount due including interest.

For example, for the first period in a $200,000 mortgage at 6 percent, multiply 200,000 by the monthly interest rate, 0.5 percent, to arrive at $1,000 for the first interest accrual. That would put the balance after the first month's interest accrual at $201,000.

Step 6

Add your monthly insurance premiums, monthly tax obligation, monthly principal payment and an additional amount for interest payment to arrive at your monthly mortgage payment that includes tax and insurance.

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