How to Calculate Your Mortgage Payment
Understanding exactly how your monthly payment is built — principal, interest, taxes and insurance — lets you compare lenders and avoid surprises at closing.
A fixed-rate mortgage payment is M = P · [ r(1+r)ⁿ ] / [ (1+r)ⁿ − 1 ], where P is the loan amount, r is the monthly interest rate (annual ÷ 12) and n is the number of monthly payments (years × 12). A $300,000 loan at 6.5% over 30 years works out to about $1,896 per month in principal and interest.
The mortgage payment formula
The standard fixed-rate payment uses the amortization formula:
M = P · [ r(1+r)ⁿ ] / [ (1+r)ⁿ − 1 ]
- M
- — Monthly principal + interest payment
- P
- — Principal — home price minus down payment
- r
- — Monthly interest rate (annual rate ÷ 12)
- n
- — Total payments (loan term in years × 12)
$300,000 loan at 6.5% over 30 years
A standard 30-year fixed mortgage on a $300,000 loan balance.
- Monthly rate r
- 6.5% ÷ 12 = 0.5417%
- Number of payments n
- 30 × 12 = 360
- Monthly principal + interest
- $1,896
- Total interest over 30 years
- $382,560
Monthly payment ≈ $1,896 — total interest of $382,560 exceeds the original loan.
Over a full 30-year term you typically pay more in interest than the amount you borrowed.
What's actually in your monthly payment (PITI)
Lenders usually collect a full PITI payment — principal, interest, taxes and insurance — in one amount:
| Component | What it covers | Typical share |
|---|---|---|
| Principal | Reduces your loan balance | ~40–60% |
| Interest | The cost of borrowing | ~40–60% |
| Property tax | Collected monthly, paid to the county annually | Varies by area |
| Homeowner's insurance | Fire, theft and liability cover | ~$100–200/mo |
| HOA fees (if any) | Community maintenance | Varies |
On a $300,000 home, taxes and insurance often add $400–$700/month on top of principal and interest.
How your down payment changes the payment
A bigger down payment means a smaller loan, a lower payment and often a better rate. On a $400,000 home at 6.5% over 30 years:
| Down payment | Loan amount | Monthly P&I | PMI required? |
|---|---|---|---|
| 5% ($20,000) | $380,000 | $2,402 | Yes |
| 10% ($40,000) | $360,000 | $2,275 | Yes |
| 20% ($80,000) | $320,000 | $2,023 | No |
Putting 20% down saves about $379/month versus 5% down — and removes PMI, worth another $100–$200/month.
Fixed vs. adjustable rate
- Fixed-rate — the rate never changes; the payment is predictable. Best when rates are low or you'll stay 7+ years. Common terms: 15, 20, 30 years.
- Adjustable-rate (ARM) — lower initial rate that resets periodically. Best if you plan to sell or refinance within 5–7 years. Common: 5/1, 7/1, 10/1.
Extra payments save thousands
Adding even a small amount to principal each month cuts total interest and shortens the loan.
$200/month extra on a $300,000 loan at 6.5%
Comparing the standard 30-year schedule with an extra $200/month applied to principal.
- Standard payment
- $1,896/mo · $382,560 interest · 30 years
- With $200/month extra
- $2,096/mo · ~$294,000 interest · ~23 years
About $88,000 of interest saved and 7 years off the loan.
Confirm your lender applies extra payments to principal, not to the next scheduled payment.
Calculate your own mortgage payment
Enter your home price, down payment, rate and term to get the exact monthly payment, amortization schedule and total interest.
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