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How Much is the Monthly Payment?: A Simple Formula

By
Real Estate Agent with RE/MAX Allegiance, Managing Broker/Branch Vice President

 In the early stages of the home buying process, many clients will often ask me what the monthly payment will be based on a price of a particular property.  

It is impossible to answer this question without knowing more about the situation

  • what is your credit score?
  • what is the interest rate on the loan?
  • how much money are you putting in as a down payment?
  • what are the taxes on the property?
  • how much are the association dues or condo fees?
  • what type of loan program do you have?


 

Calculating the monthly payment needs to weigh in all these factors.  This is best left for explanation by the mortgage professionals who can quickly feed in all these numbers into their financial calculators or computers which run through a series of complex formulas to determine the answer.

 

 

 

 

However, clients still want an answer.  So here is a rule of thumb, simple formula that gives a ballpark estimate.

Assuming a 30 year fixed rate mortgage, and assuming a 6% interest rate, the monthly payment of principal and interest only (not including taxes, insurance and other fees) is equal to $6 per $1000 of loan per month.

Plugging a $300,000 loan into this formula, you would find that the monthly payment would be approximately $1800/month.

This formula will give you a general idea of your monthly payment.  The interest rates will vary and you'll need to increase the amount based on that, but the math is easier to do in your head with the flat $6 rate.  Then you need to add in the taxes and condo or association fees, as well as insurance.

While you should consult your mortgage lender to get a good faith estimate and a more accurate picture of how your payments will look under your actual mortgage program, you can use this simple formula as a guideline to determine a monthly payment that you'll be able to afford. 

Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
STEVE:  I think all agents must get asked this question all the time.  It's definitely impossible to give a real answer without knowing all of the circumstances, but this easy formula at least gives the buyers a yardstick by which to measure.
Sep 29, 2007 06:10 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
MATTHEW:  That seems like a pretty good rule of thumb too and clients are always happy when their actual payment is lower than the estimate.
Sep 29, 2007 07:16 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
CHARLIE:  Thanks for the comments.  Some agents have that printed on the back of their business cards.  That can be helpful to clients as well.
Sep 29, 2007 07:17 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
PATRICIA:  Good job -- get them to see the loan officer first before entering your car.  No approval letter, no ride.  One of my friends calls his car "BOGO" -- buy or get out!
Sep 29, 2007 09:06 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

GITA:  Thanks for your comments.  I think that the example is a good rule of thumb.  Obviously rates fluctuate, but they have been between 6 and 6 1/2 for quite a while. 

Sep 29, 2007 12:21 PM
Joshua Lazaro, serving New Orleans and the Greater New Orleans Area!!!
Prudential Gardner, Realtors - Kenner, LA

Interesting and simple. Good stuff. Muchas gracias!

Sep 29, 2007 05:13 PM
Minnesota Home Staging Firm, Minnesota
Minnesota Home Staging Network~ MN's Top Home Staging Firm - Inver Grove Heights, MN

Thanks. I'm not a mathmatician so any little bit helps :)

All the best,

Beth

Sep 29, 2007 06:58 PM
Adam Waldman
Westcott Group Real Estate Company - Hauppauge, NY
Realtor - Long Island
BRIAN:  Nice lesson about figuring it out on the fly.  I would also recommend getting a mortgage calculator to keep in your car if this is a question that comes up a lot.  If you use this method, I would make sure to tell them that you are picking 6% as a starting point, but that it can actually be more expensive depending on other factors.  Another way of doing it when you're near a computer is to go to a website like Interest.com and use the calculator that they provide.
Sep 29, 2007 10:24 PM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

CAROL:  Thanks for sharing your method of calculation and commenting on the post.

Sep 30, 2007 01:14 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

JOEY: Thanks for your comments. First and foremost, I tell people that the lender will give them the whole story.  I warn people that this estimate is a very rough ballpark figure just to give them an idea of payments but that it should not be relied upon and the real numbers can vary widely depending on their credit, the type of loan, etc.

Sep 30, 2007 01:16 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

JASON:  Yes, when it gets to detailed, it's time to turn them over to the lender.  I don't want to be doling out financial advice -- that's not my area of expertise.

Sep 30, 2007 01:18 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

DAVE:  Thanks for sharing your story.  Our property taxes are not that high here in Virginia, but it is printed on the MLS sheet so I also tell people what the yearly taxes are and estimate the monthly payment of those as well.  I do tell the clients to talk to a loan officer.  If they really can't afford a home, I don't want to waste all kinds of time driving them around.


Sep 30, 2007 01:21 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
JOSHUA:  De nada.
Sep 30, 2007 01:22 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
BETH:  Thanks for your comments.
Sep 30, 2007 01:23 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate

ADAM: Thanks for your comments.  This is obviously how I would answer the question on the fly.  If we're in the office, I'll have the mortgage calculator or computer with me and can give a more concrete calculated answer.  

 

Sep 30, 2007 01:25 AM
Anonymous
Lucinda Zoccole

I want to buy a house estimated at 300K for 350K.  I have 30K to put dowm. Hows much would my payment be including taxes. inurancex, inc.    I ove at 8845 Rising Cfeek Ct. LV Nevada 8914

Oct 27, 2007 05:37 AM
#25
Anonymous
Lucindaa Zoccole

salary 809,000

credit score 770

 6% Fixed 

120 per month taxes

 

20.00 assoc dues whihc is pad spearartely

Right Now Convetional loan at & fxlddjicama

 

Oct 27, 2007 05:44 AM
#26
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
LUCINDA:  I appreciate your interest, but I am unable to provide you an accurate estimate and certainly cannot help you with Nevada homes.  I'd suggest using the formula I provided in this article as a rough estimate, finding a mortgage calculator online, and contacting a local Nevada mortgage lender for more information.
Oct 27, 2007 08:22 AM
Kathy McGraw
CELLing Realty - White Water, CA
Riverside County CA Real Estate
Brian- Me, I'm calling the Lender......too many formulas cloud my brain :) :)
Oct 27, 2007 08:41 AM
Brian Block
RE/MAX Allegiance, Managing Broker/Branch Vice President - McLean, VA
Northern Virginia & D.C. Real Estate
KATHY:  That's always the best bet.
Oct 28, 2007 01:31 AM