Whether you are buying your first home or your forever home, understanding your monthly mortgage payment is essential before you close. It is often the largest recurring expense in your budget, and knowing what you will owe can help you make smarter financial decisions when purchasing a home.
With borrowing costs still elevated, it is especially important to understand the full cost before you commit. Even small changes in interest rates, loan terms or down payment can significantly impact what you pay each month.
With that in mind, we will walk you through how to figure out your mortgage payment whether you are running the numbers by hand or using the calculator below to see how different loan amounts, rates and terms affect your bottom line.
How to use the mortgage calculator
Understandably, you may be struggling with determining just how much you’ll owe on your mortgage, as the mortgage payment calculation looks like this:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1].
However, with our mortgage calculator, you can forego all the complicated calculations and simply enter a few pieces of information.
First, you'll enter the overall price of your home, if you’re buying, or the current value of your home if you’re refinancing.
You’ll also include either the down payment (the cash you plan on paying upfront towards the home) or the amount of equity you have (the value of the home, minus what you owe on it).
After this, you’ll enter the term length of your loan. If refinancing, enter how many years are remaining on your current loan.
Typically, most mortgages are 30-year mortgages, but you can choose between several term lengths to decide which loan term is right for you. You can then compare how different interest rates will affect your monthly payment. Entering your annual household income and credit score will show you how much you'll be able to reasonably afford.
Using the mortgage calculator below can also help you determine how much to put down on your home. While it's recommended to put down 20% to get the best rates, it's not necessary, and you can play with this number to see how it affects your mortgage rate.
Saving on your mortgage rate
Lenders consider many factors when determining the interest rate on your mortgage, including down payment, loan term and the price of the property.
The biggest factor they take into consideration, however, is your credit score. Boosting your credit score could potentially save you thousands of dollars on your home mortgage.
The chart below, from MyFICO, shows how much you can expect to pay depending on where your credit score stands, based on a 30-year fixed mortgage of $400,000.
FICO Score |
Rate |
Monthly Payment |
Interest Paid |
|---|---|---|---|
780+ |
6.36% |
$2,492 |
$496,962 |
760+ |
6.44% |
$2,513 |
$504,504 |
740+ |
6.53% |
$2,536 |
$513,021 |
720+ |
6.66% |
$2,571 |
$525,384 |
700+ |
6.71% |
$2,584 |
$530,157 |
680+ |
6.88% |
$2,629 |
$546,458 |
660+ |
6.93% |
$2,642 |
$551,275 |
640+ |
7.05% |
$2,675 |
$562,878 |
620+ |
7.23% |
$2,723 |
$580,381 |
Here are a few other tips, besides raising your credit score, that can help you score a low mortgage rate.
- Increase your down payment: The higher your down payment, the less principal and less interest you'll have to pay over the life of the loan. You'll likely need a 20% down payment to get the best rates.
- Shop around: Because different lenders offer different rates, it's important to get at least three quotes when shopping for a mortgage in order to take advantage of the lowest rates.
- Consider an adjustable-rate mortgage (ARM): An ARM could be a good option for you, especially if you plan on selling your home sometime in the future. These mortgages offer fixed interest rates that are often lower than those for traditional mortgages for a set number of years. With the tool above, you can see how much your monthly payments will be during the fixed period of an ARM, as well as when the introductory period expires. Once the fixed period is over, your mortgage rate can go up or down based on the market.
Why running the numbers matters
With interest rates holding relatively steady and the Federal Reserve taking a cautious approach, many buyers heading into the summer home shopping season are taking a closer look at affordability. Before you make an offer, it is important to understand what your monthly mortgage payment could look like.
Using a mortgage calculator can help you compare different scenarios, from home prices to loan terms, so you can budget with confidence and make a more informed decision as you navigate the market.
Use the tool below, powered by Bankrate, to explore and compare some of today's top mortgage offers:
