How to calculate mortgage payments

Calculating mortgage payments is a subject from a field of Financial mathematics.

In order for you to fully grasp the concept, you should definitely get familiar with time value of money, present value and future value.

After that, the mortgage calculation payment is pretty straightforward — because there is a mathematical formula to calculate it.

We know different types of mortgage repayment:

• so called ordinal annuity
• an annuity due

For most mortgages the ordinal annuity is used - which means you pay after the month ends.
The formula is as follows:
PMT x ((1 - (1 + r) ^ -n ) / r) ¹ .

PMT = the period cash payment (total amount of your loan)
r = the interest rate per period (annual interest rate divided by 12)
n = the total number of periods (years * months in year)