Mortgage Calculator
Calculate your exact monthly mortgage payment — principal and interest, PMI, property tax — with a full amortization breakdown.
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How Mortgage Payments Are Calculated
Mortgage payments consist of principal (paying back the loan), interest (cost of borrowing), and often escrow payments for property tax and insurance. The principal and interest portion is calculated using the standard loan amortization formula.
📐 Mortgage Payment Formula
r = 7.5% / 12 = 0.00625; n = 360
M = $320,000 × [0.00625 × (1.00625)³⁶⁰] ÷ [(1.00625)³⁶⁰ − 1]
M = $320,000 × 0.007392 = $2,236/month
Amortization — Why You Pay Mostly Interest Early
In the early years of a mortgage, the vast majority of each payment goes to interest, not principal. For a $400,000 30-year mortgage at 7.5%, your first payment of ~$2,797 includes about $2,500 in interest and only $297 in principal. By year 15, the split approaches 50/50. This is why extra principal payments early in the loan save substantial interest.
Frequently Asked Questions
How is a Monthly Mortgage Payment Calculated?
Your monthly mortgage payment has two core components: principal and interest (P&I), plus optional escrow payments for property tax and homeowner's insurance. The P&I portion is calculated using the standard amortization formula, which ensures the loan is fully paid off by the end of the term through fixed equal payments.
The formula is: M = P × [r(1+r)^n] / [(1+r)^n − 1] where M is monthly payment, P is loan amount, r is monthly interest rate (annual ÷ 12), and n is number of payments (years × 12).
How to Calculate Your Mortgage Payment Manually
Calculate the monthly interest rate
Divide your annual interest rate by 12. For a 7% annual rate: 7 ÷ 12 = 0.5833% = 0.005833 monthly rate.
Calculate the number of payments
Multiply loan years by 12. A 30-year mortgage = 360 payments. A 15-year = 180 payments.
Apply the amortization formula
For a $320,000 loan at 7%, 30 years: M = $320,000 × (0.005833 × 1.005833^360) / (1.005833^360 − 1) = $2,129/month.
Add tax and insurance
Add monthly property tax (annual tax ÷ 12) and monthly insurance (annual insurance ÷ 12) to get your total PITI payment.
Mortgage Rates in 2025 — What to Expect
Mortgage rates fluctuate based on Federal Reserve policy, inflation, and bond markets. After a period of elevated rates in 2023–2024, rates have begun to moderate. Always compare at least 3 lenders — even a 0.25% rate difference on a $300,000 mortgage saves over $15,000 in total interest over 30 years.
15-Year vs 30-Year Mortgage — Which Saves More?
| Feature | 15-Year Mortgage | 30-Year Mortgage |
|---|---|---|
| Monthly payment | Higher (~40% more) | Lower |
| Total interest paid | Much less (often 50% less) | More |
| Interest rate | Typically 0.5–0.75% lower | Higher |
| Best for | Those who can afford higher payments | Cash flow flexibility |
What is PMI and When Do I Need It?
Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home's purchase price. PMI typically costs 0.5–1.5% of the loan amount annually. On a $400,000 loan, that's $2,000–$6,000 per year ($167–$500/month). PMI protects the lender, not you — once you reach 20% equity, you can request its removal.
How Much Mortgage Can I Afford?
The standard guideline is the 28/36 rule: housing costs should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. For a $90,000 annual salary ($7,500/month), this means a maximum housing payment of $2,100/month. Use our Home Affordability Calculator for a precise figure.