Calculating Your Mortgage Payment Amount

Reader question: If I buy a 15 thousand dollar home how much will the mortgage payment be every month?

Is it really a $15,000 home, or did you leave a zero off that number? Just curious.

I can't answer this question because there are some missing pieces. But I can tell you how to run the numbers for yourself. The missing variables I would need to know include: (A) the interest rate on the mortgage loan, (B) the length or "term" of the loan, (C) the amount of money you are putting down, (D) the amount of insurance and taxes you might be rolling into the payment.

The parts of a mortgage payment are referred to by the acronym PITI. This stands for principal (the main loan amount), interest, taxes and insurance. In most cases, all four of these things combined will determine the full amount of the mortgage -- and thus the size of monthly payments.

Interest is the biggest variable in this equation. A lender will use your credit score to determine the interest rate they give you. If you have a good credit score you'll qualify for better / lower rates. If you have a bad credit score, you'll pay more interest and will therefore have a larger mortgage payment each month.

You can use a mortgage calculator to get a ballpark range of what your payments might be. But this is only an approximate figure. You won't know the actual monthly amount until you apply for a mortgage loan and find out what interest rate you're getting.

If you don't know the interest rate yet, then simply enter the loan amount (minus any down payment you are making), and leave the interest rate set to whatever default setting the calculator has. Set the length of the loan -- 15 years, 30 years or whatever. And then hit the "calculate" number. There's your ballpark figure.

Related article: Using a Mortgage Payment Calculator