How to Calculate Mortgage Interest

Formula to Calculate Mortgage Interest

The formula to calculate mortgage interest is:

Interest = Principal x Rate x Time

Where:

• Principal is the original amount borrowed
• Rate is the annual interest rate
• Time is the amount of time, in years, that the loan is taken out for

For example, if you borrow $100,000 at 5% interest for 30 years, the formula would be:

Interest = 100,000 x 0.05 x 30 = $150,000

How to Calculate Monthly Interest

To calculate monthly interest, you need to first convert the annual interest rate into a monthly rate. To do this, you divide the annual interest rate by 12.

For example, if the annual interest rate is 5%, the monthly rate would be 0.416%.

Once you have the monthly rate, you can calculate the monthly interest by using the following formula:

Monthly Interest = Principal x Rate x Time

Where:

• Principal is the original amount borrowed
• Rate is the monthly interest rate
• Time is the amount of time, in months, that the loan is taken out for

For example, if you borrow $100,000 at 0.416% interest for 30 years, the formula would be:

Monthly Interest = 100,000 x 0.00416 x 360 = $1,500

Formula for Calculating a 30 Year Mortgage

The formula for calculating a 30 year mortgage is:

Mortgage Payment = Principal x (Rate x (1 + Rate)^{Number of Payments}) / ((1 + Rate)^{Number of Payments} – 1)

Where:

• Principal is the original amount borrowed
• Rate is the annual interest rate
• Number of Payments is the total number of monthly payments for the loan (360 for a 30 year loan)

For example, if you borrow $100,000 at 5% interest for 30 years, the formula would be:

Mortgage Payment = 100,000 x (0.05 x (1 + 0.05)³⁶⁰) / ((1 + 0.05)³⁶⁰ – 1) = $536.82