How to Calculate Your Mortgage at Different Rates
- 1). Determine the amount of money that you need to borrow and the term of the mortgage. For example, you might need to borrow $310,000 over 30 years.
- 2). Plug the value for the amount borrowed into the equation for A and the term in years for Y and R for interest rate into the following equation:
Monthly payment = A * ( R/12 (1 + R/12)^(Y*12) ) / ((1 + R/12)^(Y*12) - 1)
For example, your equation using $310,000 and 30 years would be:
Monthly payment = $310,000 * ( R/12 (1 + R/12)^(30*12) ) / ((1 + R/12)^(30*12) - 1) - 3). Simplify the above equation. For example,
Monthly payment = $310,000 * ( R/12 (1 + R/12)^(30*12) ) / ((1 + R/12)^(30*12) - 1) would become
Monthly payment = $310,000 * ( R/12 (1 + R/12)^360 ) / ((1 + R/12)^360 - 1) - 4). Plug in different annual interest rates into the equation from step 3 to calculate your mortgage monthly payment at different rates. For example, if you wanted to compare your monthly payment if the mortgage was at 5.5 percent instead of 7 percent, you would insert 0.055 for R and get $1,760.15, then insert 0.07 in for R and get $2,062.44. This shows you would save $302.29 each month.
- 5). Multiply the monthly payment times the number of monthly payments you will make over the life of the loan to determine the total cost of the mortgage. For example, with a 30-year loan, you would make 360 total payments. At a rate of 5.5 percent, the total cost is equal to $1,760.15 times 360, or $633,654. At 7 percent, the total cost is equal to $2,062.44 times 360, or $742,478.40, meaning you would pay $108,824.40 more over the life of the loan.
Source...