# What Is The Formula To Calculate Interest On A Loan Understanding Monthly Payment Mortgage Calculators

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## Understanding Monthly Payment Mortgage Calculators

Calculating the monthly mortgage payment is the most basic calculation when it comes to mortgages. You can apply the same calculation to loans. Therefore, the mortgage monthly payment calculator is also called the loan payment calculator. To be safe, make sure you stay below forty percent of your net income. For example, 40% of \$4,000 goes toward a \$1,440 mortgage payment.

Here is the formula for the monthly mortgage payment:

payment = [P(1 + r)n r]/[(1 + r)n – 1]

Here are the amounts you need:

– P means the principal amount of the loan.

– r stands for interest rate. To get the interest rate, divide the interest rate by twelve months because there are twelve months in a year.

– n means the number of payments. Basically, multiply the number of years by twelve months.

Let’s say you want to know the monthly payment on a 30-year mortgage of \$100,000 at a 7% interest rate. The interest is 0.00583, which is the interest rate divided by twelve months, while the number of payments is 360 (30 years X 12 months). You have a monthly mortgage payment of \$665 per month.

Here is the actual calculation:

Payment is equal [\$100,000(1 + .00583)360 x 0.00583] / [(1 + 0 .00583)360 – 1]. Your monthly mortgage payment is \$665.30. By the way, 360 is an exponent.

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