How Mortgage Payments Are Calculated
A fixed-rate mortgage payment is calculated using the standard amortization formula. The monthly payment stays the same throughout the loan term, but the portion going to principal vs. interest shifts over time — early payments are mostly interest, while later payments are mostly principal.
The Formula
Monthly Payment = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]
- P = Principal (loan amount = home price − down payment)
- r = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
What's Not Included
This calculator shows principal and interest (P&I) only. Your actual monthly payment to your lender (PITI) will also include:
- Property taxes — typically 0.5%–2% of home value per year
- Homeowners insurance — typically $100–$200/month
- PMI — required if down payment is less than 20% (typically 0.5%–1.5%/year)
- HOA fees — if applicable
15 vs. 30-Year Mortgages
A 15-year mortgage has a higher monthly payment but saves tens of thousands in interest and builds equity faster. A 30-year mortgage offers lower payments and more flexibility, but costs significantly more over the life of the loan. Many buyers choose 30-year loans and make extra principal payments when possible.