Mortgage Calculator
A mortgage payment is the fixed monthly amount that repays a home loan, calculated from the principal, interest rate, and term with the amortization formula M = P[r(1+r)^n] / [(1+r)^n - 1]. This calculator estimates your total monthly payment — including property taxes, homeowners insurance, and PMI — and builds a full amortization schedule.
Mortgage Calculator
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Formula: M = P[r(1+r)^n] / [(1+r)^n - 1]
Worked example — Monthly Payment: $2,162 | Total Interest: $357,143 | Total Cost: $777,943
Reviewed for accuracy by Sahil, Senior Finance & Tax Editor · Editorial policy
How is a mortgage payment calculated?
M = P[r(1+r)^n] / [(1+r)^n - 1]
Where M = Monthly payment (principal & interest), P = Loan principal (home price minus down payment), r = Monthly interest rate (annual rate / 12), n = Total number of payments (years x 12). Total monthly payment also includes property tax, homeowner's insurance, and PMI if applicable.
How do you calculate a mortgage payment step by step?
Example 1: Standard 30-Year Mortgage
Problem:You're buying a $350,000 home with 20% down ($70,000), 30-year fixed at 6.5%, property taxes of $3,500/year, and insurance of $1,200/year.
Solution:Loan amount = $350,000 - $70,000 = $280,000 Monthly rate = 6.5% / 12 = 0.5417% Monthly P&I = $280,000 x [0.005417 x (1.005417)^360] / [(1.005417)^360 - 1] = $1,769.84 Monthly tax = $3,500 / 12 = $291.67 Monthly insurance = $1,200 / 12 = $100.00 PMI = $0 (20% down) Total monthly = $2,161.51
Result:Monthly Payment: $2,162 | Total Interest: $357,143 | Total Cost: $777,943
Example 2: Low Down Payment with PMI
Problem:You're buying a $300,000 home with 5% down ($15,000), 30-year fixed at 7%, property taxes of $3,000/year, and insurance of $1,100/year.
Solution:Loan amount = $300,000 - $15,000 = $285,000 Monthly P&I = $285,000 x [0.005833 x (1.005833)^360] / [(1.005833)^360 - 1] = $1,896.07 Monthly tax = $3,000 / 12 = $250 Monthly insurance = $1,100 / 12 = $91.67 PMI = $285,000 x 0.5% / 12 = $118.75 Total monthly = $2,356.49
Result:Monthly Payment: $2,356 | Total Interest: $397,585 | PMI adds $119/month
What else do people ask about mortgage payments?
How is a monthly mortgage payment calculated?
A monthly mortgage payment is calculated using an amortization formula that considers the loan principal, interest rate, and loan term. The formula is M = P[r(1+r)^n]/[(1+r)^n-1], where M is the monthly payment, P is the loan principal, r is the monthly interest rate, and n is the total number of payments. Your total monthly housing payment also includes property taxes divided by 12, homeowner's insurance divided by 12, and possibly private mortgage insurance (PMI) if your down payment is less than 20%. In the early years of your mortgage, most of your payment goes toward interest. As time passes, more of each payment goes toward the principal balance. This is called amortization.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage has higher monthly payments but saves significantly on total interest. A 30-year mortgage has lower monthly payments but costs more over the life of the loan. On a $300,000 loan at 6.5%, the 15-year option saves a large amount of interest but requires a much higher monthly payment. Choose the 30-year if you need payment flexibility. Choose the 15-year if you can comfortably afford the higher payment and want to build equity faster.
How does the down payment affect my mortgage?
The down payment directly affects your loan amount, monthly payment, interest paid, and whether you need PMI. A larger down payment means borrowing less, paying less interest, and having lower monthly payments. With a $350,000 home at 6.5% for 30 years: 5% down ($17,500) gives a monthly P&I of $2,101 plus PMI. 10% down ($35,000) gives $1,990/month plus PMI. 20% down ($70,000) gives $1,769/month with no PMI. The 20% down payment option saves roughly $332/month compared to 5% down. Over 30 years, the difference in total interest paid is over $100,000. However, tying up too much cash in a down payment can leave you without an emergency fund, so balance is important.
What other costs should I budget for when buying a home?
Beyond your monthly mortgage payment, budget for closing costs (typically 2-5% of the loan amount), which include appraisal fees, title insurance, origination fees, and attorney fees. Ongoing costs include property taxes (typically 0.5-2.5% of home value annually), homeowner's insurance ($1,000-$3,000/year), HOA fees if applicable ($200-$500/month), maintenance and repairs (budget 1-2% of home value annually), and utilities. You should also maintain an emergency fund covering 3-6 months of housing expenses. Many first-time buyers underestimate these costs. A good rule of thumb is that your total monthly housing expense should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%. This is known as the 28/36 rule.
What credit score do I need for the best mortgage rates?
A FICO score of 760 or higher typically qualifies you for the lowest advertised mortgage rates. Dropping from 760 to 700 can cost you 0.25-0.50% more in interest — on a $400,000 30-year loan, that difference costs roughly $60-$120 more per month and over $25,000 in extra interest. Scores between 620-699 still qualify for conventional loans but at noticeably higher rates. Scores below 580 generally require FHA loans, which accept down payments as low as 3.5% but mandate mortgage insurance for the life of the loan. Before applying, pay down revolving balances to below 30% of credit limits — this alone can boost your score 20-40 points.
What is the difference between fixed-rate and adjustable-rate mortgages?
A fixed-rate mortgage locks your interest rate for the entire loan term — 15, 20, or 30 years — so your principal and interest payment never changes. This predictability is valuable in rising-rate environments. An adjustable-rate mortgage (ARM) begins with a lower fixed rate for an introductory period (commonly 5, 7, or 10 years), then resets annually based on an index like SOFR plus a margin. A 5/1 ARM might start at 5.5% versus a 30-year fixed at 6.5%, saving roughly $220/month on a $400,000 loan. ARMs are advantageous if you plan to sell or refinance before the first adjustment, but carry payment uncertainty afterward if rates have risen significantly.
How do mortgage points work?
Mortgage discount points are prepaid interest you pay at closing to permanently reduce your loan's interest rate. One point costs 1% of the loan amount — on a $350,000 mortgage, one point costs $3,500 — and typically lowers your rate by 0.20-0.25%. To determine whether buying points makes sense, calculate your break-even period: divide the upfront cost by your monthly savings. For example, $3,500 paid to save $55/month breaks even in about 64 months (5.3 years). If you plan to stay in the home beyond that point, buying points saves money. If you may sell or refinance sooner, keep the cash. Points are tax-deductible in the year of purchase for a primary residence.
When should I consider refinancing my mortgage?
Refinancing makes financial sense when the long-term interest savings exceed the upfront costs. The standard threshold is a rate reduction of at least 0.5-0.75%, though the actual benefit depends on your loan balance and remaining term. Calculate your break-even: if refinancing costs $5,000 and saves $175/month, break-even is about 29 months. You should also consider refinancing to switch from an ARM to a fixed rate for payment certainty, to eliminate PMI if your equity has grown, or to shorten your term from 30 to 15 years to save tens of thousands in interest. Avoid resetting a 25-year-old mortgage back to a new 30-year loan — you may pay more total interest even at a lower rate.
How does the debt-to-income ratio affect mortgage approval?
Lenders measure two debt-to-income ratios to assess affordability. The front-end (housing) DTI divides your total monthly housing costs — principal, interest, property taxes, insurance, and HOA fees — by gross monthly income; most conventional loans cap this at 28%. The back-end (total) DTI adds all other monthly debt obligations (car loans, student loans, credit card minimums) and is typically capped at 36-43% for conventional loans. FHA loans allow back-end DTIs up to 50% for borrowers with strong compensating factors like high cash reserves. For example, earning $7,000/month with a $1,800 mortgage payment and $500 in other debts gives a back-end DTI of 33%, which is comfortably within conventional limits.
Can I remove PMI from my mortgage?
Private mortgage insurance (PMI) is required on conventional loans when your down payment is less than 20%, adding $30-$70 per month per $100,000 borrowed. You have several paths to remove it. Under the Homeowners Protection Act, you can formally request cancellation once your loan-to-value ratio reaches 80% based on original purchase price — the lender may require a new appraisal to confirm value has not dropped. PMI is automatically terminated when amortization reduces the balance to 78% of the original purchase price. If home values in your area have risen significantly, refinancing to a new loan without PMI may be worthwhile. FHA loans issued after June 2013 with less than 10% down carry mortgage insurance premiums (MIP) for the life of the loan and cannot be removed without refinancing.
References
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