- 1). Calculate the monthly interest rate on the mortgage by dividing the annual interest rate by 12. For example, if your annual interest rate equals 6.24 percent, you would divide 0.0624 by 12 to get 0.0052.
- 2). Multiply the monthly interest rate by the amount borrowed. For example, if you borrow $290,000, you would multiply $290,000 by 0.0052 to get $1,508.
- 3). Calculate the number of monthly payments that you will make by multiplying the number of years in the term of the loan by 12. For example, if you took out a 20-year mortgage, you would multiply 20 times 12 to get 240.
- 4). Add 1 to the monthly interest rate. In this example, you would add 1 to 0.0052 to get 1.0052.
- 5). Raise the result from Step 4 to the -Pth power, where P is the number of monthly payments, found in Step 3, you will make on the mortgage. Raising a number to a power means to use exponents. In this example, you would raise 1.0052 to the -240th power to get 0.288008178.
- 6). Subtract the solution from Step 5 from 1. In this example, you would subtract 0.288008178 from 1 to get 0.711991822.
- 7). Divide the result from Step 2 by the result from Step 6 to calculate the monthly payment. In this example, you would divide $1,508 by 0.711991822 to find the monthly payment to be $2,118.00.
- 8). Multiply the monthly interest rate by the outstanding balance of your mortgage to find the interest portion of the monthly payment. In this example, for the first monthly payment you would multiply $290,000 by 0.0052 to get $1,508.
- 9). Subtract the interest portion of the monthly payment from the total monthly payment to find the principal portion of the payment. Concluding the example, you would subtract $1,508 from $2,118 to find that your principal portion would be $610 for the first monthly payment.
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