How to Calculate a 30-Year Fixed Mortgage

Before you take out a mortgage, you need to make sure you can afford the monthly payment. According to Bankrate, you don't want to spend more than 28 percent of your pretax monthly income on your mortgage, or have your total debt payments exceed 36 percent of your monthly income. The amount of your monthly payment will be determined by how much you borrow and the interest rate you pay

Tip

Shopping around for a mortgage won't hurt your credit as long as all the inquiries come in a short period of time -- typically a month or less -- according to the Fair Isaac Corporation.

Step 1

Divide the interest rate by 12 to figure the monthly rate. For example, if your 30-year mortgage has a 4.12 percent interest rate, divide 0.0412 by 12 to get a monthly rate of 0.003433.

Step 2

Add 1 to the monthly rate. In this example, add 1 to 0.003433 to get 1.003433.

Step 3

Raise the result to the 360th power, because you make 360 payments over a 30-year mortgage. In this example, raise 1.003433 to the 360th power to get 3.4354.

Step 4

Multiply the Step 3 result by the monthly interest rate. In this example, multiply 3.4354 by 0.003433 to get 0.011792.

Step 5

Subtract 1 from the Step 3 result. In this example, subtract 1 from 3.4354 to get 2.4354.

Step 6

Divide the Step 4 result by the Step 5 result. In this example, divide 0.00792 by 2.4354 to get 0.0048436.

Step 7

Multiply the Step 6 result by the amount of the mortgage to figure the monthly payments. To finish the example, if you took out a $150,000 mortgage, multiply 0.0048436 by $150,000 to find your monthly payments will be $726.54.

Warning

As Kiplinger reports, the cost of owning a home includes far more than just the mortgage payment. Budget for other costs such as property taxes, homeowner's insurance and miscellaneous expenses around the house like replacing or repairing appliances.

Tip

If you're curious how much you'll pay in interest, multiple your monthly payment by 360 to find the total amount you'll pay and then subtract the amount you borrowed. For example, on a $150,000 mortgage with a $726.54 monthly payment, you'll pay $261,554.40 over the life of the mortgage, or $111,554.40 in interest.

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