- 1). Find the monthly interest rate by dividing the yearly rate by 12. For example, if the yearly rate equals 8.46 percent, you would divide 0.0846 by 12 to get a monthly rate of 0.00705.
- 2). Find the number of months in the term of the mortgage by multiplying the number of years you will make payments by 12. For example, for a 20-year mortgage, you would multiply 20 by 12 to get 240.
- 3). Add 1 to the monthly interest rate. In this example, you would add 1 to 0.00705 to get 1.00705.
- 4). Compute the result from the previous step raised to the -Mth power, with M being the number of monthly payments in the term of the mortgage. Continuing the example, you would raise 1.00705 to the -240th power to get 0.185247301.
- 5). Subtract the result from the previous step from 1. Furthering the example, you would subtract 0.185247301 from 1 to get 0.814752699.
- 6). Divide the amount borrowed by the result from the previous step. In this example, if you borrowed $400,000, you would divide $400,000 by 0.814752699 to get 490,946.5172.
- 7). Multiply the previous step's result by the monthly interest rate to find the monthly mortgage bill. Finishing the example, you would multiply 490946.5172 by 0.00705 to find the monthly mortgage cost to be $3,461.17.
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