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Calculate A Mortgage: How To Figure Out Your Mortgage Payments

Even if a borrower doesn’t know the formula to calculate a mortgage payment, they can still get the answer by using a mortgage payment calculator. The formula is very complicated.

However, it would benefit a borrower to know mortgage payment formula because they’d know how their loan is broken up into payment units each month. They’d know not only the amount they are going to pay. Most importantly, they’d understand why it is that amount they are paying.

What formula to calculate a mortgage payment to use would depend on the type of loan payment program you are on. Are you on a principal + interest payment program or an interest-only loan?

Each would require different formulas. The formula to calculate a mortgage payment is used to determine how much the borrower’s monthly repayment should be.

When a mortgage broker or lender provide you information on how much your repayment each month would be, they use the payment formula appropriate to your loan program. When calculating payments, the formula remains the same although the actual units/figures/variables used in the computation may vary.

Some financial institutions, for instance, may calculate your monthly payments on a monthly basis and some on a daily or weekly basis. The formula to calculate a mortgage payment always involves these values: principal outstanding or loan size, annual interest rate percentage, and loan term.

Mortgage companies in Canada compound interest every 6 months and so have to use a different mortgage payment formula. However, it can also be used to calculate US mortgage payments; you simply have to replace Canadian interest rates with US interest rates.

Online mortgage payment calculators usually calculate payments on a monthly basis, though some do figures on an annual, weekly, and daily basis.

The figures that the calculator will yield should be close approximation of the figures that your lender will show you since your lender uses the same formula to calculate mortgage payments as mortgage calculators do.

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Calculate A Mortgage: How To Figure Out Your Mortgage Payments