How to Manually Calculate a Mortgage

Your mortgage payment depends on loan amount, interest rate and payback schedule.

Large New Ohio Home image by Shannon Workman from

Before you jump in to buying a home – often the largest purchase of your life – you need to know that you can afford the monthly mortgage payment. You could calculate the payment using a quick online calculator, but if you want to see how all of the variables work together, you can do it by hand using the mortgage monthly payment formula.

The formula for calculating your mortgage monthly payment requires using exponents, so unless you can do those in your head, you’ll need a calculator to help. When it comes to budgeting for your new home, remember that the mortgage payment is only one cost. You’ll also need to budget for additional expenses like property taxes, homeowner’s insurance, homeowner’s association fees and home maintenance.


The formula for calculating a monthly mortgage payment incorporates the amount you are borrowing, your assigned interest rate, and the length of your mortgage repayment plan.

Factors Affecting Mortgage Monthly Payment

The amount of a mortgage monthly payment is affected by three factors: how much you borrow, your mortgage interest rate and the length of your mortgage. The more you borrow, the higher your monthly payment. Similarly, the higher the interest rate, the larger each monthly payment will be. If the mortgage rate changes during the life of the mortgage, such as with an adjustable rate mortgage, you’ll have to recalculate the monthly payments at that time. Finally, the longer the term of your mortgage, the lower your monthly payment. However, with a longer term, you will pay more interest over the life of the mortgage.

Calculating Your Mortgage Payment

To figure your mortgage payment, start by converting your annual interest rate to a monthly interest rate by dividing by 12. Next, add 1 to the monthly rate. Third, multiply the number of years in the term of the mortgage by 12 to calculate the number of monthly payments you’ll make. Fourth, raise the result of 1 plus the monthly rate to the negative power of the number of monthly payments you’ll make. Fifth, subtract that result from 1. Sixth, divide the monthly rate by the result. Last, multiple the result by the amount you borrowed.

For example, say you borrowed $265,000 on a 15-year mortgage at 4.32 percent. Start by dividing 0.0432 by 12 to find that the monthly rate equals 0.0036. Next, add 1 to 0.0036 to get 1.0036. Third, multiply 15 years by 12 payments per year to find that your loan consists of 180 monthly payments. Fourth, raise 1.0036 to the negative 180th power to get 0.5237. Fifth, subtract 0.5237 from 1 to get 0.4763. Sixth, divide 0.0036 by 0.4763 to get 0.00755826. Finally, multiply 0.00755826 by $265,000 to find your monthly payment will be $2,002.93.