Learn the formula behind monthly mortgage payments and what costs to include beyond principal and interest.
Try the Mortgage CalculatorThe basic payment formula
Your principal and interest payment is calculated using the loan amount, annual interest rate, and number of monthly payments. The standard formula amortizes the loan so each payment covers accrued interest first, then reduces the remaining balance.
For example, a $320,000 loan at 6.5% over 30 years produces a principal-and-interest payment of about $2,022 per month. That number alone is not your full housing payment — taxes, insurance, PMI, and HOA must be added for an accurate budget.
Costs beyond principal and interest
Property taxes vary by county and are often escrowed by your lender. Homeowners insurance protects the property and is also commonly included in the monthly payment. If your down payment is less than 20%, PMI adds to the cost until you reach sufficient equity.
HOA fees apply in condos and planned communities. Always add these to P&I when comparing homes — two houses with the same loan amount can have very different total monthly costs.
Using a mortgage calculator effectively
Start with the home price and your down payment to determine the loan amount. Enter the interest rate you expect based on current market rates and your credit profile. Choose 30-year for lower payments or 15-year to save on total interest.
Adjust property tax and insurance estimates to match the area you are shopping in. Run multiple scenarios — a half-point rate change or a different down payment can shift your payment by hundreds of dollars per month.
Ready to run the numbers for your situation?
Try the Mortgage Calculator