How to Calculate Your Mortgage Payment

Principal and interest (P&I)

The core mortgage payment covers principal (loan balance reduction) and interest (cost of borrowing). Lenders use standard amortization: each month you pay accrued interest first, then the remainder reduces principal.

The standard amortizing payment formula is: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments. In plain terms: you pay interest on the remaining balance each month, and the fixed payment is sized so the loan reaches zero at the end of the term.

For a $320,000 loan at 6.5% over 30 years, principal and interest is about $2,022 per month. Over 15 years at the same rate, P&I rises to about $2,787 — but total interest paid drops sharply.

P&I vs total monthly housing payment

P&I is only part of what most homeowners pay each month. Your full housing payment typically includes property taxes, homeowners insurance, PMI (if applicable), and HOA fees. Lenders often quote a “PITI” payment — principal, interest, taxes, and insurance.

Budgeting on P&I alone understates cost. A $2,022 P&I payment can become $2,600 or more once taxes, insurance, and PMI are included. Always compare total monthly housing cost when evaluating homes or loan offers.

Property taxes

Property tax is usually expressed as an annual amount based on assessed value and local mill rates. Many lenders escrow taxes — collecting 1/12 each month and paying the county on your behalf.

Tax rates vary widely by state and county. When estimating, use the seller’s current tax bill or local assessor data rather than a national average. Our mortgage calculator accepts an annual tax estimate and spreads it monthly.

Homeowners insurance

Homeowners insurance protects the structure (and often personal property) against covered losses. Lenders require coverage for the life of the loan. Like taxes, insurance is commonly escrowed and added to the monthly payment.

Premiums depend on location, home value, construction type, and deductible. Coastal or high-risk areas may cost more. Enter your quote or a reasonable annual estimate when calculating total payment.

PMI and down payment

Private Mortgage Insurance (PMI) applies on most conventional loans when you put less than 20% down. PMI is calculated as a percentage of the loan amount per year — often roughly 0.3% to 1.5% — and divided into monthly payments.

PMI does not reduce your loan balance; it protects the lender. See our PMI guide for cost ranges, removal rules, and how down payment size affects monthly cost. Our mortgage calculator estimates PMI automatically when down payment is below 20%.

HOA, loan term, and interest rate

HOA fees apply in condos and many planned communities. They are separate from the mortgage but part of monthly housing cost — include them in any affordability comparison.

Loan term (15 vs 30 years) and interest rate are the other major levers. A lower rate or shorter term increases P&I but reduces total interest over time. Rate quotes depend on credit score, down payment, loan type, and market conditions — benchmark rates are a starting point, not a guarantee of your offer.

Run your numbers

Use the mortgage calculator to combine home price, down payment, rate, term, taxes, insurance, PMI, and HOA into one total monthly payment. Adjust each input to match your scenario and compare 15-year vs 30-year terms side by side.