How to Calculate Your Monthly Mortgage Payment (Formula + Examples)
Learn the exact mortgage payment formula lenders use, see a full worked example, and understand every factor that affects your monthly payment.
Every lender uses the same core formula to calculate your monthly mortgage payment. Understanding it lets you estimate payments yourself, verify lender quotes, and make smarter decisions about loan term and down payment.
The Mortgage Payment Formula
The standard formula for a fixed-rate mortgage monthly payment is:
M = P × [r(1 + r)ⁿ] / [(1 + r)ⁿ − 1]
M = monthly payment · P = principal loan amount · r = monthly interest rate (annual rate ÷ 12) · n = number of payments (years × 12)
This formula is called the standard amortization formula. It ensures every payment is identical while the portion going to principal vs. interest shifts each month — early payments are mostly interest, later payments are mostly principal.
Worked Example: $400,000 Home
Let's calculate the monthly payment on a $400,000 home with 20% down ($80,000), leaving a $320,000 loan at 6.75% annual interest over 30 years.
- 1.Convert annual rate to monthly: r = 6.75% ÷ 12 = 0.5625% = 0.005625
- 2.Calculate number of payments: n = 30 × 12 = 360
- 3.Apply the formula: M = 320,000 × [0.005625 × (1.005625)³⁶⁰] / [(1.005625)³⁶⁰ − 1]
- 4.Result: Monthly payment = $2,075 (principal & interest only)
Real total cost
At $2,075/month for 360 months, you pay $747,000 total — $427,000 in interest on a $320,000 loan. That's why choosing the right rate and term matters enormously.
What the Formula Doesn't Include (PITI)
The formula above gives you principal and interest (P&I) only. Your actual monthly housing payment is usually PITI:
| Component | Typical Amount | Notes |
|---|---|---|
| Principal & Interest | $2,075 | From formula above |
| Property Tax | $375 | ~1.1% of home value ÷ 12 |
| Homeowners Insurance | $125 | ~0.4% of home value ÷ 12 |
| PMI (if LTV > 80%) | $0–$267 | Drops off once you reach 20% equity |
| HOA Fees | Varies | Condo/community specific |
| Total PITI | ~$2,575 | Realistic all-in monthly cost |
5 Factors That Change Your Payment
- •Loan amount — Every $10,000 more costs roughly $65/month at 6.75%
- •Interest rate — A 1% rate increase on a $320k loan adds ~$200/month
- •Loan term — A 15-year loan has higher payments but saves $150k+ in interest
- •Down payment — 20%+ down eliminates PMI and reduces the loan principal
- •Property taxes & insurance — These vary by location and insurer
First Payment Breakdown
On your very first payment of $2,075, here's where the money goes:
| Destination | Amount | Percentage |
|---|---|---|
| Interest (Month 1) | $1,800 | 86.7% |
| Principal (Month 1) | $275 | 13.3% |
| Remaining Balance | $319,725 | — |
By month 180 (year 15), the split flips: roughly $1,100 goes to principal and $975 to interest. This crossover is why extra payments in early years are so powerful — they directly reduce the principal that generates future interest.
How to Use This in Practice
- •Use our Mortgage Calculator to instantly run any scenario with taxes and insurance
- •Compare 15-year vs 30-year payments side by side
- •See how an extra $200/month cuts years off your loan
- •Check how different down payments affect PMI and total cost
Estimates only
Calculator results and the worked example above are for educational purposes. Your actual rate depends on your credit score, lender, loan type, and market conditions at time of application.
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Disclaimer: All figures in this article are illustrative estimates. Actual mortgage rates, payments, and terms vary based on your credit score, lender, location, and market conditions. MortgageInsightHub is not a lender or financial advisor. Consult a licensed mortgage professional before making financial decisions.