How to Calculate Your Monthly Mortgage Payment
Reviewed by Jerry Croteau, Founder & Editor
Table of Contents
I Stared at That Number for Way Too Long
I remember sitting at my kitchen table with a pre-approval letter that said I could borrow up to 380,000 and honestly having no clue what that would actually cost me each month. The lender had thrown out a number — something like 2,400 a month — but I couldn't figure out how they got there. I tried plugging things into random websites and each one gave me a slightly different answer, and I started wondering if anyone actually understood this stuff or if we were all just trusting whatever number popped up on screen.
Turns out, the math isn't that bad once someone explains it like a normal person.
So that's what I'm going to do here. I'll walk through the actual formula, show you a worked example with real-ish numbers, and give you a table so you can see how different rates and loan terms change your payment. And if you just want the answer fast, I built a
The Formula (It Looks Worse Than It Is)
P = the loan principal (how much you're borrowing)
r = monthly interest rate (annual rate ÷ 12)
n = total number of monthly payments (loan term in years × 12)
Yeah, I know. It looks like something from a textbook you'd rather not open. But the thing is, once you plug in your numbers, it's really just multiplication and division. The exponent part — the (1 + r)^n — is the only piece that makes it annoying to do by hand, and that's what calculators are for.
Let me walk through a real example.
Say you're buying a house for 350,000 and putting 70,000 down (that's 20%, which means you dodge PMI — more on that in a sec). Your loan amount is 280,000. You lock in a 30-year fixed rate at 6.75%.
Here's the step-by-step:
- Convert the annual rate to monthly: 6.75% ÷ 12 = 0.5625%, or 0.005625 as a decimal
- Figure out total payments: 30 years × 12 = 360 months
- Calculate (1 + r)^n: (1.005625)^360 = roughly 7.5017 — I used a calculator for this, obviously
- Plug into the formula: 280,000 × [0.005625 × 7.5017] / [7.5017 – 1]
- Numerator: 280,000 × 0.04220 = about 11,815.7
- Denominator: 6.5017
- Monthly payment: 11,815.7 ÷ 6.5017 = roughly 1,817
So your principal and interest payment lands around 1,817 per month. That's before taxes, insurance, and any HOA fees get tacked on — which is why your actual mortgage bill will be higher. I've seen people get surprised by an extra 400-600 a month in escrow charges alone.
If you want to skip the arithmetic, just use our
How Rate and Term Change Everything
This is the part that really messed with my head when I was shopping for a loan. A half-percent difference in rate sounds like nothing. It is not nothing.
| Loan Amount | Rate | Term | Monthly Payment (P&I) | Total Interest Paid |
|---|---|---|---|---|
| 280,000 | 6.25% | 30 years | ~1,724 | ~340,640 |
| 280,000 | 6.75% | 30 years | ~1,817 | ~373,920 |
| 280,000 | 7.25% | 30 years | ~1,911 | ~407,960 |
| 280,000 | 6.75% | 15 years | ~2,478 | ~166,040 |
| 280,000 | 6.75% | 20 years | ~2,120 | ~228,800 |
Look at the difference between 6.25% and 7.25% on a 30-year loan. That's about 187 more per month and over 67,000 more in total interest over the life of the loan. For one percentage point! And then look at what happens when you switch from 30 years to 15 years at the same rate — your monthly payment jumps by about 660, but you save over 207,000 in interest. That's a staggering amount of money.
This is why I always tell people to run the numbers on a
The Stuff the Formula Doesn't Include
That formula up there? It only covers principal and interest. Your actual mortgage payment — the one that hits your bank account — usually includes a few more line items bundled into what lenders call PITI:
- Principal & Interest — the formula part
- Property Taxes — varies wildly by location (I've seen anywhere from 100 to 800+ per month)
- Homeowner's Insurance — typically in the ballpark of 100-250 per month
- PMI — if your down payment is less than 20%, expect to add roughly 0.5-1% of the loan amount per year, divided by 12
On that 280,000 loan example, if you only put 5% down (so you're borrowing about 332,500 instead), PMI alone could add 140-275 per month on top of everything else. That adds up fast. You can estimate this with our
And if you're trying to figure out whether you can actually afford the house — not just qualify for the loan, but comfortably afford it — I'd recommend checking our
A Quick Note on Paying Extra
One thing that blew my mind when I finally built a spreadsheet for my own mortgage: even small extra payments make a huge difference over time. On that 280,000 loan at 6.75% for 30 years, adding just 200 per month to your payment shaves off about 7 years and saves you roughly 95,000 in interest. Two hundred bucks!
If you're curious about your own situation, play around with our
And for the bigger picture of what you can realistically borrow based on your income and debts, there's also the
Does the mortgage payment formula include property taxes and insurance?
Nope. The standard formula (M = P × [r(1+r)^n] / [(1+r)^n – 1]) only calculates principal and interest. Property taxes, homeowner's insurance, and PMI are separate. Your lender rolls them into one monthly payment through an escrow account, but they're not part of the math formula itself.
How much does one extra mortgage payment per year save?
On a 280,000 loan at 6.75% over 30 years, making one extra payment per year (about 1,817) could cut roughly 4-5 years off your loan and save you somewhere around 60,000-70,000 in interest. The exact savings depend on when you start making extra payments — earlier is better, since more of your early payments go toward interest anyway.
What's the difference between a fixed-rate and adjustable-rate mortgage payment?
With a fixed-rate mortgage, your principal and interest payment stays the same for the entire loan. With an adjustable-rate mortgage (ARM), you typically get a lower rate for an introductory period — say 5 or 7 years — and then it adjusts periodically based on market rates. Your payment could go up or down. I personally prefer the predictability of fixed-rate, but ARMs can make sense if you're confident you'll sell or refinance before the adjustment period kicks in.
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