How to Calculate Payments on a Mortgage

Now that you've decided to stop renting and buy your own place, you need to figure out how much house you can afford. Adding up all the different costs can seem overwhelming, but calculating payments on a new mortgage is a straightforward process.

Determine the amount of the mortgage you want to obtain.

Determine the amount you can afford as a down payment. If you put down more than 20 percent of the value of the house, you won't be required to buy private mortgage insurance, known as PMI. If you put down less than 20 percent of the cost of the home, you'll probably be required to purchase PMI.

Contact your bank or lender to obtain an interest rate quote for your mortgage. Your interest rate will vary based on your credit history and score and the amount of your mortgage.

Contact an insurance agent to obtain an estimate of the cost of homeowners insurance in your area. While you can't get a exact quote before finding a specific house, most insurance companies will provide an estimate based on your local area and the price range of your house. Homeowners insurance is generally added to your monthly mortgage payment and held in an escrow account by your bank. Your bank then pays the yearly premium from this escrow account.

Contact your tax assessor's office to find the property tax rate in your area. Many assessors publish this information online. As with your homeowners insurance, property tax is generally collected as part of your mortgage payments and is held in an escrow account. If this happens, your bank or lender is responsible for paying the yearly property tax bill from this escrow account.

Find a free online mortgage calculator. The calculator will take care of the hard work in figuring out your monthly mortgage payments. Plug in the estimates you obtained above, and the calculator will provide a complete estimate of the cost of your new mortgage.


  • Private mortgage insurance protects the bank or lender if you default on your mortgage and generally costs between $50 and $80 per month for median-priced home of $159,000.
  • Don't forget that many condo buildings and some town house developments also have a monthly fee for the upkeep of the common areas and landscaping. Depending on the condo association rules, this may be collected with your mortgage or paid directly to the association.

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About the Author

Based in Beaufort, SC, Eric H. Doss has been writing professionally since 2005. Mr. Doss is a writer and editor for an international publishing and information company and his work has appeared on eHow, Answerbag and other websites. A trained historian, he holds a master's degree from Clemson University.