Understanding How to Estimate a Mortgage Payment

Read Time: 2min
Last Updated: 9/11/2021

Picture this: you’ve decided you want to buy your dream home. So you hop online to start your search. You filter the results and put in your top requirements: three bedrooms, two bathrooms, a decent lot size in your favorite neighborhood. Lo and behold, you found it. The home of your dreams. But, is it in reach? That is the question.

Understanding your estimate mortgage payment will help you determine if this “perfect home” is really perfect when it comes to your financial situation. In terms of buying a house, not much is more disappointing than watching the home you’ve envisioned raising a family in slip through your fingers because you cannot afford the monthly payment. To ensure this doesn’t happen to you, learn how to estimate a mortgage payment and move forward securely and confidently.

How to Estimate a Mortgage Payment

Understanding how to estimate a mortgage payment is an essential yet challenging task. There are typically four main components to any monthly mortgage payment:

  • Principal – Principal is the amount borrowed that must be paid back
  • Interest – Interest can be fixed or variable. Interest is the rate on a mortgage that is paid to the lender monthly for borrowing the money
  • Taxes – Taxes are costs paid to the government
  • Insurance – Insurance is financial protection or reimbursement against losses

    To properly and accurately estimate a mortgage payment, you must first know how much you plan to borrow: the principal amount. Secondly, you must know the interest rate at which a lender is willing to lend you money. Lastly, although the figures for taxes and insurance may vary, you can estimate to calculate your monthly mortgage payment.

The Estimate Mortgage Payment Equation

M = P[r(1+r)^n/((1+r)^n)-1)]

The above equation can help you better understand just how much house you can afford. But it does require some math. Here’s how to solve it:

  • M represents the anticipated monthly mortgage payment
  • P represents the principal amount
  • r represents the monthly interest rate, which is divided by 12 (the months in a year). For example, an interest rate of 2.5 divided by 12 equals 0.00208333.
  • n represents the number of payments you will pay on your loan. For example, a loan term of 30 years multiplied by 12 (the months in a year) equals 360 (the total payments for your loan).

The Easier Way to Estimate a Mortgage Payment

For those who wish to use technology to your benefit, you can calculate your monthly mortgage payments with a mortgage payment calculator. It is a much easier way to estimate a mortgage payment and you don’t have to be good at math to use it.


Run the Numbers on Financing Your Dream Home.

Terms and conditions apply. Rates are subject to change.


Finding your dream home is only part of the equation when it comes to the entire homebuying process. One of the most important parts is getting approved for a home loan. Partnering with the right mortgage lender can ensure that you get a low interest rate and have several mortgage programs to choose from. Take a look at the most commonly asked mortgage questions to make sure you are well-informed. Then, reach out to a Wyndham Capital Loan officer to get your mortgage pre-approval started today.

Maggie joined the Wyndham Capital Mortgage team in November 2020 as a Content Strategist. She has more than six years of content creation experience, which includes launching WBTV’s digital brand Queen City Weekend (now QC Life) and garnering more than 1.1 million page views across her articles. With a love of storytelling, she hopes to bring that passion to WCM and the many families it serves. She resides in Charlotte, North Carolina, and can often be found at a coffee shop, latte in hand.

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