How to Calculate a Mortgage Payment — Formula, Examples & Free Calculator
Knowing how to calculate a mortgage payment before you apply puts you in control. You'll understand exactly what drives your monthly cost, how the math changes with different loan types, and where a lender can make a difference. This guide walks through the formula, shows worked examples, and explains every line item in your payment.
The Basic Mortgage Payment Formula (P&I Only)
The principal and interest portion of your mortgage payment uses the standard amortization formula:
M = P × [r(1+r)^n] ÷ [(1+r)^n − 1]
Where: M = monthly payment, P = loan amount (principal), r = monthly interest rate (annual rate ÷ 12), n = total number of payments (loan term in years × 12)
Example: $340,000 loan, 6.5% rate, 30-year term. r = 6.5% ÷ 12 = 0.5417%. n = 360 payments. M = $2,149/month for principal and interest.
This formula gives you the P&I only — your actual monthly payment will be higher once you add taxes, insurance, and mortgage insurance.
Full PITI Payment — What Gets Added
Your real monthly payment includes four components, which is why lenders use the acronym PITI:
P — Principal: The portion that reduces your loan balance. In early years, this is the smallest slice.
I — Interest: The cost of borrowing. In early years, this is the largest slice — over time the ratio flips as you build equity.
T — Taxes: Property taxes, typically divided by 12 and collected monthly into an escrow account. Varies by county — commonly 0.5% to 2% of home value per year.
I — Insurance: Homeowner's insurance, also escrowed monthly. Roughly 0.25% to 0.5% of home value per year.
Example: $340,000 loan at 6.5% for 30 years. P&I = $2,149. Taxes = $354/mo. Insurance = $142/mo. Total PITI = $2,645/month.
FHA Loan Payment Calculation
FHA loans add a monthly Mortgage Insurance Premium (MIP) to the PITI calculation.
FHA MIP = (Loan amount × 0.55%) ÷ 12 for most 30-year loans with less than 10% down.
Example: $325,000 FHA loan (3.5% down on $337,000 home) at 6.75% for 30 years. P&I = $2,108. Taxes = $337/mo. Insurance = $126/mo. MIP = $149/mo. Total = $2,720/month.
Unlike PMI on conventional loans, FHA MIP cannot be cancelled if your down payment was less than 10% — it lasts for the life of the loan. This is why many buyers with improving credit scores refinance out of FHA once they reach 20% equity.
Conventional Loan with PMI
Conventional loans with less than 20% down require Private Mortgage Insurance (PMI).
PMI rates typically range from 0.2% to 1.5% of the loan amount per year depending on credit score and LTV ratio.
Example: $360,000 conventional loan (10% down on $400,000 home) at 6.875% for 30 years. P&I = $2,364. Taxes = $400/mo. Insurance = $150/mo. PMI (~0.8%) = $240/mo. Total = $3,154/month.
PMI cancels automatically when your loan balance reaches 78% of the original purchase price. Unlike FHA MIP, you can also request cancellation at 80% LTV.
How Loan Term Affects Your Payment
The loan term has a dramatic effect on your monthly payment and total interest paid:
30-year loan: Lower monthly payment, more total interest. Best for: buyers maximizing monthly cash flow.
15-year loan: Higher monthly payment (roughly 40–50% more), but dramatically less total interest. Best for: buyers who want to build equity faster and pay less overall.
Example on $300,000 at 6.5%: 30-year = $1,896/mo, total interest = $382,600. 15-year = $2,613/mo, total interest = $170,250. The 15-year saves $212,350 in interest — but costs $717 more per month.
Common Questions
How much is a mortgage payment on a $300,000 house?
On a $300,000 home with 20% down ($60,000), a 30-year loan at 7% gives a P&I payment of about $1,596/month. Add estimated taxes ($300/mo) and insurance ($113/mo) for a total PITI of roughly $2,009/month. With 3.5% FHA down and 6.75% rate, the payment would be higher due to a larger loan and MIP.
What is the monthly payment on a $400,000 mortgage?
A $400,000 mortgage at 7% for 30 years has a principal and interest payment of $2,661/month. Total PITI including taxes and insurance runs approximately $3,200–$3,400/month depending on your location and insurance costs.
How do I lower my monthly mortgage payment?
The four ways to lower your payment: (1) Make a larger down payment to reduce the loan amount. (2) Buy at a lower price point. (3) Secure a lower interest rate through better credit or by shopping lenders. (4) Extend the loan term — though this increases total interest paid. Refinancing can also lower your payment if rates have dropped since you originated.
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