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How to Calculate Mortgage Payments
6 min read
A mortgage is a long-term loan secured against a property. Before you commit to one, it is worth understanding exactly how much you will pay each month and in total. The math is the same as any amortizing loan—but the numbers are larger and the stakes higher.
The Calculation
Monthly Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ−1]
Example: $300,000 loan at 7% annual rate for 30 years.
• Monthly rate r = 7 ÷ 12 ÷ 100 = 0.005833
• n = 360 months
• Monthly payment ≈ $1,995.91
• Total paid over 30 years ≈ $718,528
• Total interest ≈ $418,528
Principal, Interest, Taxes, and Insurance (PITI)
Lenders quote the principal-and-interest (P&I) payment, but your actual monthly obligation is usually higher because it includes:
• Property taxes (escrowed monthly)
• Homeowner's insurance (escrowed monthly)
• Private mortgage insurance (PMI) if your down payment is under 20%
Always factor PITI into your budget, not just P&I.
Fixed vs. Adjustable Rates
A fixed-rate mortgage locks in your interest rate for the entire term. Your payment never changes, making budgeting straightforward.
An adjustable-rate mortgage (ARM) starts with a lower fixed rate for a set period (e.g., 5 years), then adjusts periodically based on a market index. ARMs can save money if rates fall but carry the risk of higher payments if rates rise.
Down Payment Impact
A larger down payment lowers the loan amount, reducing both the monthly payment and total interest. It also eliminates or reduces PMI. Putting 20% down on a $375,000 home reduces your loan to $300,000 and typically removes PMI from the equation entirely.
Try the Mortgage Calculator.
Frequently Asked Questions
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage has a higher monthly payment but roughly half the total interest. A 30-year mortgage offers lower monthly payments and more flexibility. If you can comfortably afford the 15-year payment, the interest savings are substantial.
What credit score do I need for a good mortgage rate?
Generally, a score of 740 or above qualifies for the best rates. Scores between 620–739 still qualify for conventional loans, but at higher rates. This calculator does not factor in credit score—use it for estimates and consult a lender for personalized rates.