How To Calculate Mortgage Payments By Hand?

Calculating mortgage payments isn’t hard if you know the figures and formula.



Before you even apply for a mortgage, you need to get some things in order such as the money. You need to calculate how much mortgage you will be able to pay against your income each month.

Calculating mortgage payments can be done by hand too, but using an online calculator is of course easier- and may avoid rookie mistakes. Both ways, you need to have some figures ready with you such as:

  • Your principal mortgage amount
  • Interest rate
  • Loan term
  • Cost of homeowner’s insurance
  • Taxes
  • Private mortgage insurance if your down payment is less than 20%

Once you have all of these figures, calculating your mortgage payment by hand isn’t hard.

How to calculate Mortgage Payments manually?

In these easy steps, you can learn to determine your mortgage payment by hand. Get a piece of paper and a pen, and follow through!

But first, note down the mortgage principal and interest formula, which is:

M = P [ I ( 1 + I )^N ] / [ ( 1 + I )^N – 1 ]

Start by naming the values in the above formula:

Principal “P”
Interest rate “I”
Number of periods “N”

To figure your mortgage payment, start by converting your annual interest rate to a monthly interest rate by dividing by 12.

Next, add 1 to the monthly rate.

Third, multiply the number of years in the term of the mortgage by 12 to calculate the number of monthly payments you’ll make.

Fourth, raise the result of 1 plus the monthly rate to the negative power of the number of monthly payments you’ll make. Fifth, subtract that result from 1. Sixth, divide the monthly rate by the result. Last, multiple the result by the amount you borrowed.

Let’s do it with numbers now.

For example, say you borrowed $265,000 on a 15-year mortgage at 4.32%.

Start by dividing 0.0432 by 12 to find that the monthly rate equals 0.0036.


Next, add 1 to 0.0036 to get 1.0036.

Third, multiply 15 years by 12 payments per year to find that your loan consists of 180 monthly payments.

Fourth, raise 1.0036 to the negative 180th power to get 0.5237.

Fifth, subtract 0.5237 from 1 to get 0.4763. Sixth, divide 0.0036 by 0.4763 to get 0.00755826.

Finally, multiply 0.00755826 by $265,000 to find your monthly payment will be $2,002.93.

Looks complicated, but once you have the figures handy, all you need to do next is to enter those in the formula to calculate your mortgage payments.

How do you calculate the Total Cost of a Mortgage?

Once you have your monthly payment amount, calculating the total cost of your loan is easy. You will need the following inputs, all of which we used in the monthly payment calculation above:

  • N = Number of periods (number of monthly mortgage payments)
  • M = Monthly payment amount, calculated from last segment
  • P = Principal amount (the total amount borrowed, minus any down payments)

To find the total amount of interest you’ll pay during your mortgage, multiply your monthly payment amount by the total number of monthly payments you expect to make. This will give you the total amount of principal and interest that you’ll pay over the life of the loan

Mortgage Calculator Amortization

Amortization is an accounting term which refers to paying off the loan in monthly installments, and over time, the principal amount increases whereas the interest amount decreases.

A mortgage amortization calculator is used to:

  1. Determine how much principal you owe now, or will owe at a future date.
  2. Determine how much extra you would need to pay every month to repay the mortgage in, say, 22 years instead of 30 years.
  3. See how much interest you have paid over the life of the mortgage, or during a particular year, though this may vary based on when the lender receives your payments.
  4. Figure how much equity you have.

To learn the exact values, you can use the Amortization Mortgage Calculator available online.


Gone are the days when you had to go to a mortgage lender and ask them to calculate the values for you, and actually trust their calculation. Now, the formula for calculating mortgage payments is available on the internet, all you need to do is keep all the figures handy and put them in the formula.

Moreover, if calculating by hand seems tricky to you, you can take help from the calculators available online. Just enter the numbers there and the algorithm will run them for you to give a close estimate of what you should be expecting.


John Otero

John Otero

John Otero is an industry practitioner with more than 15 years of experience in the insurance industry. He has held various senior management roles both in the insurance companies and insurance brokers during this span of time. He began his insurance career in 2004 as an office assistant at an agency in her hometown of Duluth, MN. He got licensed as a producer while working at that agency and progressed to serve as an office manager. Working in the agency is how he fell in love with the industry. He saw firsthand the good that insurance consumers experienced by having the proper protection. John has diverse experience in corporate & consumer insurance services, across a range of vocations. His specialties include Major Corporate risk management and insurance programs, and Financial Lines He has been instrumental in making his firm as one of the leading organizations in the country in generating sustainable rapid growth of the company while maintaining service excellence to clients.

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