## How to Calculate Mortgage Payments by Hand
Calculating mortgage payments by hand can be a daunting task, but it’s not as difficult as it may seem. By following a few simple steps, you can easily determine your monthly mortgage payment.
### Step 1: Gather Your Information
Before you can begin calculating your mortgage payments, you will need to gather the following information:
* **Loan amount:** The amount of money you are borrowing to purchase your home.
* **Interest rate:** The annual percentage rate of interest charged on your loan.
* **Loan term:** The length of time you have to repay your loan, typically expressed in years.
* **Property taxes:** The annual amount you pay in property taxes on your home.
* **Home insurance:** The annual cost of insuring your home.
### Step 2: Calculate Your Monthly Interest Rate
Your monthly interest rate is simply your annual interest rate divided by 12. For example, if your annual interest rate is 5%, your monthly interest rate would be 5% / 12 = 0.417%.
### Step 3: Calculate Your Monthly Principal Payment
Your monthly principal payment is the amount of money you will pay towards the principal balance of your loan each month. To calculate your monthly principal payment, use the following formula:
“`
Monthly Principal Payment = Loan Amount * (Monthly Interest Rate / (1 – (1 + Monthly Interest Rate)^(-Loan Term)))
“`
For example, if you have a loan amount of $200,000, an annual interest rate of 5%, and a loan term of 30 years, your monthly principal payment would be:
“`
Monthly Principal Payment = $200,000 * (0.417% / (1 – (1 + 0.417%)^(-30))) = $1,046.46
“`
### Step 4: Calculate Your Monthly Property Tax Payment
Your monthly property tax payment is simply your annual property tax divided by 12. For example, if you pay $2,400 in annual property taxes, your monthly property tax payment would be $2,400 / 12 = $200.
### Step 5: Calculate Your Monthly Home Insurance Payment
Your monthly home insurance payment is simply your annual home insurance premium divided by 12. For example, if you pay $1,200 in annual home insurance premiums, your monthly home insurance payment would be $1,200 / 12 = $100.
### Step 6: Add Up Your Payments
Your total monthly mortgage payment is the sum of your monthly principal payment, monthly property tax payment, and monthly home insurance payment. In the example above, your total monthly mortgage payment would be:
“`
$1,046.46 + $200 + $100 = $1,346.46
“`
### Tips for Calculating Mortgage Payments
* You can use a mortgage calculator to verify your results.
* Round your results to the nearest cent.
* Consider using an escrow account to pay your property taxes and home insurance premiums. This will ensure that you have enough money to cover these expenses when they are due.
* Remember that your monthly mortgage payment may change over time if your interest rate changes.
### Conclusion
Calculating mortgage payments by hand can be a helpful way to understand the true cost of your loan. By following the steps outlined above, you can easily determine your monthly payment and budget accordingly.