Mortgage calculator

The mortgage payment calculation looks like this: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]. The variables are as follows: M = monthly mortgage payment P = the principal amount i = your monthly interest rate. Your lender likely lists interest rates as an annual figure, so you’ll need to divide by 12, for each month of the year. So, if your rate is 5%, then the monthly rate will look like this: 0.05/12 = 0.004167. n = the number of payments over the life of the loan. If you take out a 30-year fixed rate mortgage, this means: n = 30 years x 12 months per year, or 360 payments.

Mortgage lenders are required to assess your ability to repay the amount you want to borrow. A lot of factors go into that assessment, and the main one is debt-to-income ratio. Your debt-to-income ratio is the percentage of pretax income that goes toward monthly debt payments, including the mortgage, car payments, student loans, minimum credit card payments and child support. Lenders look most favorably on debt-to-income ratios of 36% or less — or a maximum of $1,800 a month on an income of $5,000 a month before taxes.

The calculus behind mortgage payments is complicated, but our Mortgage Calculator makes this math problem quick and easy.

First, next to the space labeled "Home price," enter the price (if you're buying) or the current value of your home (if you're refinancing).

In the "Down payment" section, type in the amount of your down payment (if you're buying) or the amount of equity you have (if you're refinancing). A down payment is the cash you pay upfront for a home, and home equity is the value of the home, minus what you owe. You can enter either a dollar amount or the percentage of the purchase price you're putting down.

Next, you'll see “Length of loan.” Choose the term — usually 30 years, but maybe 20, 15 or 10 — and our calculator adjusts the repayment schedule.

Finally, in the "Interest rate" box, enter the rate you expect to pay. Our calculator defaults to the current average rate, but you can adjust the percentage. Your rate will vary depending on whether you’re buying or refinancing.

As you enter these figures, a new amount for principal and interest will appear to the right. our calculator also estimates property taxes, homeowners insurance and homeowners association fees. You can edit these amounts or even ignore them as you're shopping for a loan — those costs might be rolled into your escrow payment, but they don't affect your principal and interest as you explore your options.