Understanding Monthly Payments on a 30-Year Fixed Mortgage
Why Real Estate Agents Need to Know Mortgage Math
As a real estate agent, one of the most valuable services you provide for clients is helping them understand the financial side of buying a home. One of the most common questions you’ll hear is, “How much will my monthly mortgage payment be?” If you can quickly and confidently answer that, you’ll build trust and credibility.
Knowing how to estimate a monthly payment sets you apart as a knowledgeable professional. Plus, it helps you guide your buyers towards homes that fit their budget. The calculation is not as hard as it looks—when you break it down step by step, it’s actually pretty simple.
What Is a 30-Year Fixed Mortgage?
A 30-year fixed mortgage is the most popular type of home loan in the United States. It means the homeowner will pay off the loan over 30 years, and the interest rate stays the same the whole time. The monthly payment stays the same too, which helps buyers plan their finances more easily.
The Monthly Mortgage Formula (Explained Simply)
To calculate the monthly payment on a 30-year fixed mortgage, we use a special formula called the amortization formula. But to make this easy, let’s break it down into a simple example.
🧮 Mortgage Math Example: Step-by-step
Let’s say your client is borrowing $300,000 for a home.
Loan amount: $300,000
Interest rate: 6% (yearly interest rate)
Loan term: 30 years
Step 1: Convert the interest rate to a monthly rate.
6% per year ÷ 12 months = 0.5% per month
Now turn this into a decimal: 0.5% = 0.005
Step 2: Number of payments.
30 years × 12 months = 360 monthly payments
Step 3: Use the formula for monthly payment:
M = P × [r(1 + r)^n] ÷ [(1 + r)^n – 1]
Let’s plug in what we know:
- M = Monthly payment (this is what we’re solving for)
- P = $300,000 (Principal)
- r = 0.005 (monthly interest rate)
- n = 360 (number of payments)
Now we plug everything in:
M = 300,000 × [0.005(1 + 0.005)^360] ÷ [(1 + 0.005)^360 – 1]
Let’s simplify in small steps:
Step A: (1 + 0.005)^360 = (1.005)^360 ≈ 6.022575
Step B: 0.005 × 6.022575 ≈ 0.030112875
Step C: 6.022575 – 1 = 5.022575
Step D: 0.030112875 ÷ 5.022575 ≈ 0.005994
Step E: 300,000 × 0.005994 = $1,798.20
✅ Answer: The monthly mortgage payment is about $1,798.20.
This includes just the principal and interest. If your client has to pay property taxes and insurance, you’ll need to add those amounts to get the full monthly payment.
💡 Why This Matters
Now that you know how to calculate a monthly mortgage payment, you can better serve your clients. Imagine when a buyer asks you, “What would this home cost me each month?” — and you can quickly break it down right there on the spot. That’s how you become a trusted expert.
📘 Want More Practice with Real Estate Math?
If you want to become faster and more confident with these kinds of math problems, we’ve got the perfect resource for you. Our workbook, 125 Real Estate Math Problems Solved, gives you tons of real examples just like this one. Practice mortgages, commissions, taxes, and more—all explained step by step and easy to follow.
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Whether you’re preparing for the real estate exam or just want to sharpen your skills, this workbook will help you feel confident with the math behind every transaction.