Mortgage Interest Rate Calculator

What is a Mortgage Interest Rate Calculator?

A Mortgage Interest Rate Calculator is a financial tool that helps borrowers estimate their monthly mortgage payments based on the loan amount, interest rate, and loan term. This calculator provides valuable insights into the cost of borrowing and helps in making informed decisions about home financing.

Formula for Mortgage Payment Calculation

The formula used to calculate the monthly mortgage payment is:

\[M = P \times \frac{r(1+r)^n}{(1+r)^n-1}\]

Where:

• M = Monthly Payment
• P = Principal Loan Amount
• r = Monthly Interest Rate (Annual Rate / 12)
• n = Total Number of Months (Years × 12)

Calculation Steps

1. Convert the annual interest rate to a monthly rate by dividing by 12.
2. Calculate the total number of monthly payments by multiplying the loan term in years by 12.
3. Apply the formula to calculate the monthly payment.
4. Calculate the total interest paid over the life of the loan by subtracting the principal from the total amount paid.

Example

Let's consider a scenario with the following details:

• Loan Amount: $200,000
• Interest Rate: 4% per year
• Loan Term: 30 years

Calculation:

1. Monthly interest rate: 4% / 12 = 0.3333%
2. Number of payments: 30 × 12 = 360
3. Monthly payment: $954.83 (using the formula)
4. Total amount paid: $954.83 × 360 = $343,739.80
5. Total interest paid: $343,739.80 - $200,000 = $143,739.80

In this example, the borrower would pay $954.83 per month. Over the 30-year term, they would pay a total of $143,739.80 in interest on top of the $200,000 principal.

Note: This calculation assumes a fixed interest rate and does not account for additional costs such as property taxes, insurance, or private mortgage insurance (PMI). Actual mortgage costs may vary.