How to Calculate Mortgage Payments by Hand

••• home puzzle image by Hao Wang from

When buying a house, it is important to be able to determine how much of the house will need financing. Financing a house comes primarily through a mortgage and mortgage payments. A borrower should only take out a mortgage if he can afford the monthly mortgage payments. As such, it is important for a borrower to be able to calculate his monthly mortgage payments.

Determine the principal, interest per month, and the amount of payments. For example, a couple gets a $100,000 mortgage at 6 percent interest for 20 years. Six percent divided by 12 months equals 0.005 interest per month. Twenty years times 12 months equals 240 payments.

Add one to the interest rate per month, and raise the answer to the power of the number of payments. In the example, one plus 0.005 equals 1.005, then 1.005 to the power of 240 equals 3.310204.

Subtract one from the number calculated in Step 2. In the example 3.310204 minus one equals 2.310204.

Multiply the number in Step 2 by the interest rate per month. In the example, 3.310204 times 0.005 equals 0.016551.

Divide the number calculated in Step 4 by the number calculated in Step 3. In the example, 0.016551 divided by 2.310204 equals 0.007164.

Multiply the principal by the number calculated in Step 5 to find the payment. In the example, $100,000 times 0.007164 equals $716.43 per month.


About the Author

Carter McBride started writing in 2007 with CMBA's IP section. He has written for Bureau of National Affairs, Inc and various websites. He received a CALI Award for The Actual Impact of MasterCard's Initial Public Offering in 2008. McBride is an attorney with a Juris Doctor from Case Western Reserve University and a Master of Science in accounting from the University of Connecticut.

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