How is a mortgage payment calculated?

Monthly principal and interest is calculated with the amortization formula M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], using the loan amount (P), monthly interest rate (r), and number of payments (n). Property tax, insurance, and HOA are added separately.

What is a good down payment amount?

20% of the home price is a common benchmark because it typically avoids private mortgage insurance (PMI), but many loan programs allow much smaller down payments.

Why do early payments go mostly toward interest?

Interest is charged on the remaining balance each month, which is highest at the start of the loan. As the balance shrinks over time, more of each fixed payment goes toward principal instead.

Should I choose a 15-year or 30-year mortgage?

A 15-year term has higher monthly payments but far less total interest paid. A 30-year term has lower monthly payments, offering more flexibility, but costs more in interest over the life of the loan.

Mortgage Calculator

Estimate your monthly mortgage payment, total interest cost, and full amortization schedule based on your home price, down payment, loan term, and interest rate.

Home price

Down payment

Loan term (years)

Interest rate

Property tax (annual)

Home insurance (annual)

HOA dues (monthly)

Monthly Principal & Interest

$1,516.96

Total Monthly Payment

$1,866.96

Incl. tax, insurance, HOA

Total Interest Paid

$306,106.77

Total Cost of Loan

$546,106.77

Remaining Balance Over Time

How It Works

The monthly payment formula

Monthly principal and interest is calculated using the standard amortization formula: M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate, and n is the total number of monthly payments.

Amortization

Each payment is split between interest (based on the remaining balance) and principal (which reduces the balance). Early payments are interest-heavy; later payments are increasingly principal-heavy.

Beyond principal and interest

Property tax, homeowners insurance, and HOA dues are added on top of principal and interest to estimate your full monthly housing payment.

Example Calculation

A $300,000 home with a $60,000 down payment (20%), a 30-year term, and a 6.5% interest rate has a $240,000 loan amount and a monthly principal-and-interest payment of about $1,517.

Common Mistakes

Forgetting to subtract the down payment from the home price before estimating the payment — the loan amount, not the home price, is what accrues interest.
Comparing loans with different terms (e.g. 15-year vs 30-year) using only the monthly payment, without also comparing total interest paid.
Leaving out property tax, insurance, and HOA dues, which can add hundreds of dollars to the real monthly cost beyond principal and interest.

Frequently Asked Questions

How is a mortgage payment calculated?: Monthly principal and interest is calculated with the amortization formula M = P × [r(1+r)ⁿ] ÷ [(1+r)ⁿ − 1], using the loan amount (P), monthly interest rate (r), and number of payments (n). Property tax, insurance, and HOA are added separately.
What is a good down payment amount?: 20% of the home price is a common benchmark because it typically avoids private mortgage insurance (PMI), but many loan programs allow much smaller down payments.
Why do early payments go mostly toward interest?: Interest is charged on the remaining balance each month, which is highest at the start of the loan. As the balance shrinks over time, more of each fixed payment goes toward principal instead.
Should I choose a 15-year or 30-year mortgage?: A 15-year term has higher monthly payments but far less total interest paid. A 30-year term has lower monthly payments, offering more flexibility, but costs more in interest over the life of the loan.