PRACTICAL GUIDE · UTILIA WORK
How to calculate a mortgage payment
For a repayment mortgage with constant payments, the monthly amount depends on the principal, interest rate and term.
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The calculation
A standard fixed-rate repayment formula is: payment = principal × monthly rate ÷ [1 − (1 + monthly rate) raised to the negative number of payments]. At a zero rate, divide the principal by the number of payments.
Compare payment and total interest
A longer term usually reduces the monthly payment but increases total interest. Compare both figures before deciding.
What the estimate excludes
The result may exclude insurance, valuation fees, charges, taxes and future rate changes. Always review the lender's documentation.
General educational information. Examples are illustrative; check the conditions and rules applicable to your situation before making important decisions.
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