How Do You Calculate 15-Year Mortgage Payments?
Before shopping for a home, it’s important to know how much home you can afford. Several items go into calculating mortgage payments, including interest rate, amount of the mortgage and length of the loan. For a 15-year mortgage, the process is as follows: Calculate the total loan amount. This is done by subtracting your down payment from the total cost of the house and then adding any closing costs that you may incur. If you are estimating, closing costs are typically about 8 percent of the total cost of the house. Determine the total number of payments. For a 15-year mortgage, 12 monthly payments each year equates to 180 total payments. Determine the monthly compound interest rate. This is done by dividing the yearly interest rate by 12. For example, if your interest rate is 6 percent, then 0.06 / 12 = .005. Once calculated, add a “1” to the front of the number (e.g. 1.005). Raise your calculated monthly interest to the Nth power, where N equals the total number of payments. For a 15
