How to Calculate Mortgage Payments
Mortgage payments are calculated using the standard amortization formula:M = P × r(1+r)n / ((1+r)n − 1)where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments.
That formula gives you principal and interest. Your full monthly payment, often called PITI, also includes property Taxes and homeowners Insurance — and PMI plus HOA if they apply.
What Affects Your Mortgage Payment
- Home price & down payment — together they set your loan amount.
- Interest rate — small rate differences create huge long-term cost differences.
- Loan term — 15-year loans have higher monthly payments but far less total interest than 30-year.
- Property tax & insurance — vary widely by location.
- PMI — required when your down payment is below 20%.
- Extra payments — directly reduce principal and shorten the loan.
What Is Amortization?
Amortization is the process of paying off a loan with regular equal payments. Early on, most of each payment goes to interest. Over time the balance shifts and more goes to principal. The amortization schedule above shows this month-by-month.
How Extra Payments Reduce Your Mortgage
An extra $100–$200 per month on a 30-year mortgage can shave 4–7 years off the term and save $40,000–$80,000 in interest, depending on the rate. Because principal payments compound (less balance = less interest charged next month), they are one of the highest-return "investments" most homeowners can make.
Try entering an extra monthly payment above to see exactly how much you'd save on your loan.
How Much House Can You Afford?
A common guideline is the 28/36 rule: housing costs should stay under 28% of your gross monthly income, and total debt payments under 36%. Use the calculator to test different home prices against that budget.
Frequently Asked Questions
How is a mortgage payment calculated?
Lenders use the standard amortization formula on your principal, rate, and term, then add taxes, insurance, PMI, and HOA on top.
What is included in a mortgage payment?
Most mortgage payments include PITI: Principal, Interest, Taxes, and Insurance. PMI applies if you put less than 20% down. HOA dues apply in some communities.
What is PMI?
Private Mortgage Insurance protects the lender if you default. It's typically required when your down payment is below 20%, and costs about 0.3–1.5% of the loan amount per year.
How can I reduce my mortgage payment?
Larger down payment, longer term, lower rate, or refinancing later. Reaching 20% equity also removes PMI.
Should I make extra payments?
Usually yes — extra principal payments save significant interest and shorten the loan, as long as you don't have higher-interest debt to pay off first.
How much house can I afford?
Use the 28/36 rule as a starting point: housing under 28% of gross income, all debt under 36%.
Is this mortgage calculator accurate?
Yes — it uses the standard amortization formula lenders use. Real-world quotes can vary slightly due to escrow timing, exact tax assessments, and lender fees.