Refinancing Mortgage Rate: Calculate a Mortgage Payment

Calculate a Mortgage Payment-Learn What are Mortgage Rate Calculators

It is helpful for those who are thinking of owning homes through mortgage to learn how to calculate mortgage payments.
Calculating monthly mortgage payment can be done in different ways.

Old, traditional method is to do all calculation by hand on piece of paper. It is very simple in case of interest only mortgages. All we need to do is multiply borrowed amount by annual interest rate and divided by 12. For example: $100,000 loan with 6% interest only will equal $100000 x 0.06 = $6000 per year, dividing this by 12 months comes to $500 per month. Monthly payments remain the same but also balance of the loan does not change.

With mortgages where monthly payment includes principal and interest mortgage payment, it gets more complicated. It still can be done on paper using proper mathematical formula, but it is much easier to use different method. One of them is to look into monthly mortgage payment tables. Each table is set for specific interest rate and contains rows and columns corresponding to borrowed amount and number of years until the loan balance is paid off. It is also helpful to check annual amortization tables in order to understand concept of a mortgage loan.
Another way to calculate monthly mortgage payment is using Microsoft Excel software with PMT function. Following information’s need to be typed into Excel worksheet cell: borrowed amount, annual interest rate and duration of the loan using this formula=PMT(IR/12,NY*12,LA), where IR=interest rate, NY=number of years and LA=loan amount, then click “enter” and monthly payment will appear. This calculator will be accurate assuming that the interest rate does not change, and monthly payments remain the same throughout the existence of the loan.
However in the age of computers, there is much better way to calculate monthly mortgage payment. It is possible to purchase calculating software, but this is not necessary because there are a number of free mortgage calculators available on various websites which computes monthly mortgage payments for loans of different types, amounts, interest rates, and periods. More advanced calculators can automatically compute the mortgage payments with principal, interest, property taxes, insurance and private mortgage insurance, if any, for different types of loans at the same time.
Learning how to calculate mortgage payment is an essential tool to estimate monthly expenses on your mortgage.