How to Calculate a Mortgage Payment

How much will your future mortgage payment be?

Pittsburghers have often cited their city as the greatest: in its sports, in its people, and in its overall uniqueness. It's no surprise to those of us who call Pittsburgh home that it's been voted one of the most livable cities. No wonder why people want to move here!

As many know, the journey of buying a new home can be exciting, but also long and stressful. From mortgage applications to move-in day, there’s a lot of planning and time that goes into the process.

Before you start searching for homes, you should understand how to calculate a mortgage payment in order to get an idea of what your monthly payment could be. When you can estimate what that expense will look like each month, you'll be better prepared to focus on homes within your price range.

What goes into repaying your mortgage loan?

So, what exactly does the schedule of repaying your mortgage loan look like? In its simplest form, repayment of a mortgage loan requires that the borrower make a payment back to the lender monthly. That monthly mortgage payment includes both repayment of the loan principal, plus monthly interest on the outstanding balance.

Some lenders will also take a portion of your monthly mortgage payment and hold it in an escrow account to pay for your taxes and insurance. Loan payments are amortized so that your payment remains the same during the repayment period, but during that time, the percentage of the amount that goes towards principal will increase as the outstanding mortgage balance decreases.

What do I need to figure out my monthly mortgage payment?

Now that we know what goes into repaying your mortgage loan, let’s calculate what your monthly payment will be. To do this, gather (or estimate) the following items:

Purchase price of the home
Loan length
Interest rate
Insurance costs
Estimate property taxes
Monthly Homeowner Association (HOA) dues (if applicable)