How to Calculate a Mortgage Payment (Formula and Example)
5 min read
A mortgage payment is more than just paying back the loan - it usually bundles four things together, often called PITI: principal, interest, taxes, and insurance. Knowing how each piece works helps you judge what you can really afford.
Here is how to calculate a mortgage payment, with the formula, a worked example, and a free calculator that does it instantly.
Step by step
- 1Know your three loan inputs
You need the loan amount (home price minus down payment), the annual interest rate, and the term in years (usually 15 or 30).
- 2Convert the rate and term
Divide the annual rate by 12 to get the monthly rate, and multiply the years by 12 to get the number of payments. A 6% loan has a monthly rate of 0.005, and 30 years is 360 payments.
- 3Apply the monthly payment formula
Payment = P x r x (1 + r)^n / ((1 + r)^n - 1), where P is the loan amount, r the monthly rate, and n the number of payments. For a 300,000 loan at 6% over 30 years, that is about 1,799 per month in principal and interest.
- 4Add taxes and insurance
Property tax and homeowners insurance are usually collected monthly into escrow. Add these (and any PMI or HOA fees) to get your true monthly cost.
- 5Use the calculator
Enter your numbers in the Mortgage Calculator to see the monthly payment and total interest without doing the algebra.
Tips
- A larger down payment lowers both the loan amount and, above 20%, removes private mortgage insurance (PMI).
- Over a 30-year loan you often pay nearly as much in interest as the home price - a 15-year term costs more monthly but far less overall.
- Lenders typically want your total housing payment under about 28% of gross monthly income.
Frequently asked questions
What is the formula for a mortgage payment?
Payment = P x r x (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 (years x 12).
What does PITI mean?
Principal, Interest, Taxes, and Insurance - the four parts usually bundled into one monthly mortgage payment. Some loans also add PMI or HOA dues.
Does the calculator include taxes and insurance?
It focuses on principal and interest, the part set by the loan. Add your local property tax and insurance estimates to see the full monthly cost.