How to Calculate Monthly Mortgage Payment Formula

How To Calculate Mortgage Payment


While going to buy a property or other fixed assets, you might have to go for a mortgage loan to fulfill your dream. This type of loan imposes a lower rate of interest compared to the other loans. So, you have to make a little bit of researches regarding the cheapest interest rate. It can help you returning the money you have borrowed from the lender.

How to Calculate Monthly Mortgage Payment Formula

How to Calculate Monthly Mortgage Payment Formula

Want to know how to calculate the mortgage payment?

First of all, you have to understand the functions of the spreadsheet program, such as Microsoft Excel, Apple Numbers and the Google Spreadsheets also. These functions can help you out combining the interest rate, payment tenure and the principal that is to be paid at the time of paying EMIs.

Secondly, you have to make using the PMT functions. This program will direct you to make proper entries into each part by showing the functions like PMT (rate, nper, pv, [fv], [type]). The rate represents the monthly interest rate, which is calculated based upon the yearly rate and then divided by 12. If your annual rate is 10%, then your monthly rate will be .00001%.  However, ‘nper’ means the number of years/periods the repayment is going to be continued and PV stands for the present value of the loan amount. After gathering all this information, you have to put all the values and you can easily calculate the mortgage payment value.

Do you need more ways to calculate your mortgage payments?

Don’t worry, you can easily calculate the mortgage payments by using the equation. First of all, you have to understand the equation for the monthly instalments which is represented by M.

M=P * [R (1+R) N] / (1+R) N-1

where, M represents monthly EMI, P is the principle, r is the rate of interest and N represents the number of instalments you need to pay. You have to put the principle value, the rate of interest, tenure and then you can calculate the EMI value of the mortgage. For instance, if you take $100,000 as mortgage loan having 6% rate of interest per annum, for next 15 years, your P will be $100,000, R will be 0.06/12=0.005, N will be 12months *15=180 months. Now, if you put all values together, you will get the mortgage loan value.

Facing complexity in calculating the mortgage value? We are here to guide you.

You can simplify your equation by adding 1 and R within the parenthesis, which is placed on the top and the bottom of the equation. It will help you simplify your equation. After that, you try to solve the exponents, by putting in the power of ‘N’ on the solved value of (1+R), in the form of Xy. If you do not have a calculator, you can take help from the Google search engine. One more thing you should carefully deal is that the figures inside the parenthesis only will be raised to the power of some number of years, not the outside or to the -1 value of the given equation. Then, simplify it again and divide the numerator by the denominator. Finally, you should multiply the update result with P, to get the correct mortgage payment value.


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