How To Calculate Your Monthly Payment

Ever wanted to know how to calculate your monthly payment? Well, Dan Green has provided four great formulas for calculating things like principal and interest payments, or how much you’ve paid in interest in a given month or year. You can see his whole post here, but I’ve put a quick screenshot of the principal and interest formula below.

Principal and Interest Payments

Remember that the resulting number only calculates principal and interest, and that it doesn’t take into account taxes or insurance, or auxiliary fees like HOA fees. To determine taxes and insurance, take whatever those amounts are and divide by 12, and add that to the resulting number. That’s it!

Thanks, Dan, for posting these.

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Jeremy
I think so too, I think the new GFE can really eliminate some of the head-scratching and smoke and mirrors that goes on. I hope so, anyway.

Bill
LOL...we've switched lenders not by choice though...our loan has been bought twice now! We are currently with Citi, which has been fine for us. The only problem with them, is that I wanted to refi when the interest rates were really low back in the spring, but they basically said we'll get back to you in 6-8 weeks...We were in a position of weakness though since we bought in 07, and put only enough money down to cover closing.

Back on topic, the new form looks like it certainly will help everyone, and esp home buyers going through the process for the first time that might not understand all the terms, and wording.

Jeremy
Knowing as far ahead of time as possible is certainly preferable - sorry you had to go through that.

Are you with the same lender that your original loan was through, or have you since refinanced? I've heard of several people who, upon hitting the closing table and finding their terms were different, went back and refinanced to get rid of that lender. Might not make the best sense dollars and cents-wise for someone living in the home say, less than five years, but probably made them feel better when writing that check every month!

I expect that the should eliminate some of these hidden fees, but there will be lenders who eventually find ways around them. Agents need to find those lenders and avoid them like the plague.

Bill
Well we "found out" early if you want to call it that...but that was before they got the Home Owner's insurance cost wrong, and realized that taxes were paid twice a year for the city (or the county? I cant even remember!) and they calculated the paid interest wrong...so yeah we thought we knew what the total was supposed to be but the day before closing, it was a different story. It was frustrating since I had already gotten our cashier's check for closing, and that our monthly estimate was off. Not extremely off, but enough to make a difference.

Bill
I think making sure people add in those extra fees such as taxes, home-owners insurance and HOA fees is a really important thing to mention when estimating your monthly "mortgage payment". I know we were surprised at what our final monthly cost came to when adding our escrow payment which includes all those things.

Jeremy
That's a good point, Bill - there shouldn't be any surprises. That's one of the reasons why I like the new Good Faith Estimate, I think it goes much further to disclosing the full cost of the transaction.

How far were you into the loan process when you learned the full monthly cost of your loan, Bill? Please tell me it was prior to the closing table, although admittedly I have seen instances where that's been the case.