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How Do I Calculate a Monthly Mortgage Payment?

By Ann White

If you are considering buying a home you will need to know exactly how much your monthly payment will be in order to plan your financial budget. There are a few basic things that you will need to find to compute your payment.

Mortgage Amount

What is your total loan amount going to be? Hopefully, you would have gotten pre-qualified for your loan amount to advise you on what exactly you can afford. You will need this done prior to even trying to calculate a monthly mortgage payment. So if you haven’t done so find a reputable loan officer that will complete this for you.

Property tax estimation

This is the amount that the government charges to pay for basic services that you as a citizen for that area will use. All of the trash collection, police, fire and government programs are paid for from property taxes. As a homeowner you will also pay for the educational needs as well. As this is something that is voted on by your government this is not something that will remain the same every year. But you will need to have a starting point. So you can either base it upon last year’s property taxes or call and find out what the taxes are for the address you are interested in.

Interest rate

Interest rates are how the banks, credit unions, and financial institutions make their money. If you have really good credit then you should get a low interest rate. If your credit score is under 600 you might want to see if you can raise your credit score prior to getting a loan. You could end up pay an additional hundred thousand dollars or more just because of bad credit. This money could be used for a greater down payment or paying off your loan earlier.

Type of Loan

What type of loan do you have? Is it a fixed rate, interest only, or ARM loan? This will determine how much you pay per month. Many of the interest only or ARM loans are what caused the great banking crash of 2008 so you might want to stay away from those. However, the type of loan greatly affects the cash outlay you send every month.

You won’t need any fancy equipment to figure this out. You won’t need to buy a financial calculator either. There are many free listed online for you to use. What you need to do is to input the interest rate, mortgage amount and the length of your loan in months. And it will spit out the monthly payment that you will pay. Now you simply need to divide that property tax amount by 12 to get the amount needed to pay each month and add that to the figure received from the mortgage calculator and it will advise you on what your monthly payment will be. You have just calculated your monthly mortgage payment. This is can be used for a fixed or ARM loan. An interest only loan will be much less than this as you won’t be paying any principal amounts.

Related posts:

1. What Is Included in My Monthly Mortgage Payment?
2. If I Pay More Than My Monthly Payment On My Mortgage, How Is It Applied?
3. How Will My Mortgage Interest Rate Impact My Monthly Payment?
4. How Do I Calculate My Mortgage Taxes?
5. What Don’t Low Mortgage Rates And Payment Calculators Tell You?