When you’re budgeting, calculating your monthly home mortgage payments is important. Without doing this you won’t be able to budget correctly until you have your first mortgage payment in your bill, and when you have an especially tight budget this simply won’t work. Today we’re also going to go over how to calculate the total amount of interest you’ll be paying on your mortgage and how to find how much mortgage you’re paying a year.
First Thing’s First, What Is A Mortgage?
Before getting into the equations you’ll need to find out what your monthly payments are, how much interest you’re paying, and the total amount of your mortgage plus interest it’s important to make sure we’re on the same page about what a mortgage is. In short, a mortgage is a loan that is taken out so you can buy a home. Until this loan is paid off the bank still owns the house, and you can choose from several loan lengths. The most common mortgage lengths are 15, 20, and 30 years.
Getting Into the Equations
Of course, you didn’t come here to be told something you likely already know. You came here to find out how to calculate your mortgage. Using a mortgage calculator is going to be your best bet unless you’re very good at math, and even if you are good at math, a mortgage calculator will provide you an accurate answer much more quickly than you’ll be able to do by working out the math problem.
Your monthly mortgage payment equation is going to look like this: M = P[r(1+r)^n/((1+r)^n)-1)] which is a scary complicated math problem, but lets at least give you some context if you’re looking to do this math problem yourself. M is your monthly payment, P is the principal loan amount, r is your interest rate, and n is the total number of payments made over the lifetime of the payment. For those of us that are good at math, this equation is a piece of cake, but for the rest of us even just seeing all of those parentheses and letters in a math equation likely had us breaking out in a cold sweat.
Why it Matters
Budgeting is important to make sure that you don’t end up in a position that you don’t want to be in financially. Keeping on budget as well as responsibly using credit cards and other lines of credit is the best way to make sure that you’re doing the financially responsible thing and can help you flourish financially for years to come.
Buying A Home Is A Big Decision
Buying a home is likely one of the biggest purchases you’ll make in your life, and requires for most people to take out very large loans. Fortunately, there are many mortgage companies out there that are happy to help you make sure that you’re getting the best mortgage available for you. It’s important to look out for your interest rates, APR, and also the length of your mortgage to make sure that you’re getting exactly what you want out of your mortgage. The financial industry runs off of a lot of very complicated equations, and fortunately, a calculator that can help you find the answer to your complicated equation is just a simple google search away. Make sure to remember to do all of your homework on both your home and mortgage before you purchase because you can likely be stuck in an agreement, and in that home, for a very long time.