How To Calculate The Cost Of A Mortgage


When buying a home, understanding the cost of your mortgage is crucial for budgeting. Our mortgage cost calculator helps you determine the monthly payment you’ll need to make. In this article, we’ll guide you on how to use the calculator and explain the formula behind the calculation.


To calculate the monthly mortgage payment, we use the following formula:

Monthly Payment = Loan Amount × (Monthly Interest Rate / (1 – (1 + Monthly Interest Rate)^(-Loan Term)))

  • Loan Amount: The total loan amount in dollars.
  • Monthly Interest Rate: The monthly interest rate (annual rate divided by 12 and converted to a decimal).
  • Loan Term: The loan term in months (number of years multiplied by 12).

The formula calculates the monthly payment required to pay off the loan over the specified term.

How to Use

Our mortgage cost calculator is user-friendly:

  1. Enter the loan amount in dollars.
  2. Enter the annual interest rate in percentage.
  3. Enter the loan term in years.
  4. Click the “Calculate” button.

The result, your estimated monthly mortgage payment, will be displayed in the “Monthly Mortgage Payment” field.


Suppose you’re taking out a loan for $200,000 with an annual interest rate of 4.5% and a 30-year loan term.

  • Loan Amount: $200,000
  • Annual Interest Rate: 4.5%
  • Loan Term: 30 years

After clicking “Calculate,” the calculator will display a monthly mortgage payment of approximately $1,013.37.


  1. What factors affect the cost of a mortgage?
    • The loan amount, interest rate, loan term, and any additional costs like property taxes and insurance can influence the total cost.
  2. What is an amortization schedule, and how does it relate to the mortgage cost?
    • An amortization schedule details how each payment is divided between interest and principal. It affects the total cost by showing you how much interest you’ll pay over the life of the loan.
  3. Does a higher interest rate mean a higher mortgage cost?
    • Yes, a higher interest rate results in a higher monthly payment and increases the total cost of the mortgage.
  4. Can I reduce the mortgage cost by making extra payments?
    • Yes, making extra payments towards the principal can save you money on interest and shorten the loan term.
  5. Are there other costs to consider, such as property taxes and insurance?
    • Yes, property taxes, homeowners’ insurance, and private mortgage insurance (PMI) can add to the overall cost of homeownership.


Understanding the cost of a mortgage is essential when purchasing a home. Our calculator and formula provide a convenient way to estimate your monthly payments. Keep in mind that while the calculator offers an estimate, other costs like property taxes and insurance are not included. Accurate budgeting and planning are key to successful homeownership.

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