Interest On Mortgage Calculator
To calculate the interest on a mortgage calculator, put in the principal balance, the term and interest rate. Interest is the money value of time that you pay the lender for borrowing their money. The principal is the actual amount that goes towards paying down your loan itself. Determining the principal amount vs interest can be a bit complex unless you have an amortization schedule.
Mortgage Payment Equation=
M = P[r(1+r)^n/((1+r)^n)-1)]
- M = Total monthly payment
- P = Principal loan amount
- r = Monthly interest rate
- n = number of payments (term)
If you multiply the payment by the term, this is the total amount due over the course of the loan if it was paid on time each month and carried to the fullest term. Your payment will naturally consist of more of your payment going towards interest than principal. However, you have the ability to pay more towards each payment and may be able to dictate that the excess goes towards the principal amount. If you wanted to pay the exact amount of principal as interest, then divide the total amount by the term of the loan and you can see how much you owe each month.
As you pay off your mortgage, the interest portion you pay will change because it is calculated as a percentage of the principal amount. When you pay off more of the debt, the interest that you pay will decrease too.
Determining the interest that you will pay is more complicated. The amount of interest you owe each month is determined by the annual interest rate and the portion of the year that has elapsed. This number can then be added to your monthly principal payment. It is also important to consider potential changes to your interest rate such as arm products if you are not on a fixed-rate mortgage.
To calculate a short term loan, then this becomes easier to understand and can be done with a regular calculator.
The equation that should be used to calculate your monthly interest payment over a 1 year term is:
Monthly Interest Rate X Principal X Time in months/12 = Total Monthly Interest
Before you take out a mortgage, it is good practice to use a mortgage interest calculator to work out exactly how much interest you will pay each month. That way, you can see exactly what you are able to afford. At MortgageQuote.com, we can show you options from a number of lenders to help you find a potential loan in your price range, and even help you get pre-approved so you’re ready to go as soon as you find the right property.