Mortgage Calculator :

A mortgage calculator stands as the most pivotal tool that could be created to educate first-time property owners in the United States about their prospective monthly mortgage obligation. This provides knowledge of what to sign for financially when purchasing a house. The calculator requires various financial input data to calculate and clearly show what the user will pay financially.

How to Use the Mortgage Calculator

1. Principal Amount:

Give the total loan amount or the principal. This is how much a person has borrowed in purchasing a property.

2. Interest Rate:

 In this slot, enter the interest rate on the mortgage annually. It is what goes into the calculation of how much interest is to be paid within the monthly installments.

3. Loan Term:

Enter the number of years one wants to pay off the loan. The most common US loan terms are 15, 20, or 30 years.

4. Down Payment:

Enter the amount that one pays at the beginning of the loan to buy the property. This amount will be subtracted from the total loan amount as the principal.

5. Property Taxes and Insurance

If applicable, then enter the annual property taxes and homeowners insurance; theses amounts are usually included in the monthly mortgage payment through an escrow account. 

Example Calculation

Principal Amount: $300,000
Interest Rate: 4 % per annum
Loan Term: 30 years
Down Payment: $60,000
Annual Property Taxes: $3,000
Annual Homeowners Insurance: $1,500

Step-by-Step Process:

1.Calculate the Loan Amount: 

Subtract the down payment from the principal amount.
$300,000 – $60,000 = $240,000

2.Calculate the Monthly Interest Rate

Take the annual interest rate and divide it by 12.
4% / 12 = 0.3333% a month

3. Calculate the Total Number of Payments

Take the loan term and multiply it by 12.
30 years * 12 = 360 payments

4. Calculate the Monthly Payment (Principal and Interest):

The formula used in calculating the mortgage payment is:




\(M = P \times \frac{r(1 + r)^n}{(1 + r)^n – 1}\)

M is the monthly payment
P is the amount of money borrowed ($240,000)
r is the monthly interest rate. We’ll use 0.3333% or 0.003333.
n is the number of payments. We’ll use 360.

5. Adding Monthly Property Taxes and Insurance

To get these monthly amounts, take the annual property taxes and insurance, and divide by 12.
Property Taxes: $3,000 / 12 = $250
Homeowners Insurance:$1,500 / 12 = $125

6. Total Monthly Payment:

The total month-to-month payment is derived from the addition of the monthly property taxes and insurance to the monthly principal and interest payment.