To calculate the monthly payment of your mortgage is the most basic calculation in terms of mortgage. You can apply the same calculation for loans. That is why mortgage monthly payment calculator is also called loan payment calculator. To be safe, make sure you stay below forty percent of your net income. For example, 40% of $4,000 comes to $1,440 mortgage payment.

Here is the mortgage monthly payment formula:

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

Here are the amounts that you need:

- P means principal amount of loan.

- r means interest rate. To get the rate divide the interest rate by twelve months, because there are twelve months in year.

- n means the number of payments. Basically, multiply number of years by twelve months.

Suppose you want to know the monthly payment for a 30 year mortgage for $100,000 at 7% interest rate. Rate equals .00583 which is interest rate divide by twelve months, while number of payments equals 360 (30 years X 12 months). You pay $665 mortgage monthly payment per month.

Here is the actual calculation:

Payment equals [$100,000(1 + .00583)360 x 0.00583] / [(1 + 0 .00583)360 - 1]. Your monthly mortgage payment comes to $665.30. By the way, 360 is an exponent.

By Dennis Estrada

So you’re ready to make the move from renter to homeowner. It is a big decision and before you can move forward, you need to determine how much you can borrow. This is an important step in the process because banks want to know whether the borrower can pay back the money before it’s loaned. Once that’s been determined, you can then calculate how much of a mortgage you can afford.

The term in the finance community is called borrowing power and it’s pretty simple to calculate. It is based on income and financial obligations. There are many simple borrowing power calculators available on the Internet. The calculators have fields for income, dependants, car payment, credit limit and other payment obligations, such as child support. Banks will look at your credit limit in this assessment and aside from lowering debt, decreasing your credit limit could be a simple way to raise your borrowing capacity. A bank may consider a person with the option to go into more debt a higher risk. It is important to understand that lending criteria can vary by institution and may also consider living expenses and your saving habits.

Calculating your borrowing power is different than a mortgage calculator in that the latter can be used to compare different types of mortgages, rates and the impact of time on the size of the loan. These calculators allow you to input varying loan amounts, interest rates, terms and what affects, if any, extra payments will have on the pay-off date. Many will also include an amortization table.

In short, determining your borrowing power gives you an idea of how much you can borrow considering your current assets and liabilities. While a mortgage calculator will estimate the amount of a mortgage, the amount of monthly payments and possible durations of the loan. The wide availability of these tools on the Internet can allow you to determine your own credit worthiness prior to applying for a loan.

By Chris G Bell