Mortgage Calculator
How to Calculate Mortgage Monthly Installment
Mortgage Loan Formula
The mortgage monthly installment (A) can be calculated using the following formula:
A = P × (r × (1 + r)n) / ((1 + r)n – 1)
Where:
- A = Monthly installment
- P = Loan amount (Principal)
- r = Monthly interest rate (Annual interest rate / 12)
- n = Total number of monthly payments (Loan term in years × 12)
Example Calculation
Let’s calculate the monthly installment for a loan with the following details:
Loan Amount (P): $500,000
Annual Interest Rate: 5%
Loan Term: 20 years
Step 1: Convert annual interest rate to monthly interest rate:
r = 5% / 12 = 0.4166667% = 0.004166667
Step 2: Convert loan term to months:
n = 20 × 12 = 240 months
Step 3: Apply the formula:
A = $500,000 × (0.004166667 × (1 + 0.004166667)240) / ((1 + 0.004166667)240 – 1)
Step 4: Calculate the result:
A = $3,300
Final Answer
The monthly mortgage payment for a $500,000 loan with a 5% annual interest rate over 20 years is approximately $3,300 per month.