How to Manually Calculate a Mortgage

A mortgage is a long-term commitment that can take up a significant part of your monthly budget. You can manually calculate your monthly payment to figure how much you will owe each month. A typical fixed-rate mortgage requires equal monthly payments for the life of the loan. The lender applies a portion of the payment to the principal balance and a portion toward interest in a process called amortization. If you make all of your monthly payments on time, you will gradually pay off your loan by the end of the loan term.

Step 1

Multiply your home’s purchase price or estimated value by the percentage of the value you will finance with a mortgage. For example, assume you will finance 80 percent of a $937,500 home with a mortgage. Multiply $937,500 by 80 percent, or 0.8, to get a $750,000 loan amount.

Step 2

Divide the mortgage’s annual interest rate by 12 to convert it to a monthly rate. In this example, assume your annual interest rate is 6 percent. Divide 6 percent, or 0.06, by 12 to get a 0.005 monthly rate.

Step 3

Multiply the number of years of the mortgage by 12 to determine the total number of monthly payments. In this example, assume you will get a 30-year loan. Multiply 30 by 12 to get 360 monthly payments.

Step 4

Plug the numbers into the following formula: [R/(((1 + R)^M) - 1)] x [(1 + R)^M] x L. In the formula, R represents the monthly interest rate, M represents the number of monthly payments and L represents the loan amount. The formula in this example would be [0.005/(((1 + 0.005)^360) - 1)] x [(1 + 0.005)^360] x $750,000.

Step 5

Add the monthly interest rate to 1 and raise the result to the power of the number of monthly payments in the first and second parts of the formula. In this example, add 0.005 to 1 to get 1.005. Raise 1.005 to the power of 360 to get 6.02258. This leaves [0.005/(6.02258 - 1)] x 6.02258 x $750,000.

Step 6

Calculate the denominator in the first part of the formula. Divide the numerator by your result. In this example, subtract 1 from 6.02258 to get 5.02258. Divide 0.005 by 5.02258 to get 0.0009955. This leaves 0.0009955 x 6.02258 x $750,000.

Step 7

Multiply the remaining numbers to determine your monthly payment. Concluding the example, multiply 0.0009955 by 6.02258 by $750,000 to get a payment of approximately $4,497 per month. If you make this $4,497 payment every month, you will pay off the loan in 30 years.


  • If you must pay monthly mortgage insurance or must pay into an escrow account for taxes and hazard insurance, add these monthly costs to your mortgage payment to figure your total monthly payment.

Photo Credits

  • Large New Ohio Home image by Shannon Workman from

About the Author

Bryan Keythman has performed stock investment research and writing for a consulting firm since 2008. He also has prior experience sourcing and underwriting commercial real-estate investment and development opportunities for a commercial real-estate developer. Keythman holds a Bachelor of Science in finance.

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