How to Estimate Mortgages

The total costs of a mortgage consists of the principal, or amount of money you borrowed, the interest, or what the bank charges you to borrow the money, the property taxes and insurance, and, in cases where people borrow more than 80 percent of the value of the property, private mortgage insurance, or PMI, that covers the lost equity for the lender if you default on the loan. You have to know the amount of each part of a mortgage to estimate the monthly payment.

• 1

  Calculate the monthly principal and interest payment yourself by using the standard mortgage formula: M = P[I(1 + I)N] / [(1 + I)N - 1] where M equals the total principal and interest payment, P equals the principal, I equals the interest and N equals the number of payments. Use an online mortgage principal and interest calculator, such as those found on Bankrate and Mortgage-Calc, if you do not want to calculate the amount by hand.

• 2

  Divide the annual property tax by 12 to get the monthly amount. You can do the same with homeowner's insurance, if it will be built into your monthly mortgage payment.

• 3

  Contact the lender to determine the cost of any required PMI, usually 1 percent to 2 percent of the loan amount. Divide the PMI figure by 30, and divide that answer by 12 to get the monthly PMI amount.

• 4

  Add the principal and interest, property tax, homeowner's insurance and PMI to get the total monthly mortgage payment amount.