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For general informational purposes only, not financial advice. Actual loan terms and payments are set by your lender.

How Mortgage Payments Are Calculated

A fixed-rate mortgage payment is calculated so that the exact same payment amount, made every month for the full term, pays off both the principal and all the interest by the end of the loan. Early payments are mostly interest; later payments are mostly principal — this calculator uses the standard amortization formula lenders use for principal & interest (P&I).

M = P × [r(1 + r)ⁿ] ÷ [(1 + r)ⁿ − 1]

Where M is the monthly payment, P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12).

Worked Example

Example: $350,000 home, $50,000 down, 6.5% annual rate, 30-year term

Step 1: Loan amount → $350,000 − $50,000 = $300,000 (14.3% down)
Step 2: Monthly rate → 6.5% ÷ 12 = 0.5417% = 0.005417
Step 3: Number of payments → 30 × 12 = 360
Step 4: Apply the formula → $1,896.20 per month (P&I)

Over the full 30-year term, that's $682,633.47 paid in total — meaning $382,633.47 of that is interest, more than the loan amount itself.

Adding Taxes, Insurance & HOA (PITI)

P&I is only part of a real monthly mortgage bill. This calculator can also factor in property tax, homeowners insurance, and HOA fees to give you a full monthly total — commonly referred to as PITI (Principal, Interest, Taxes, Insurance).

Same loan, with $3,600/year tax, $1,200/year insurance, $50/month HOA

Monthly tax: $3,600 ÷ 12 = $300.00
Monthly insurance: $1,200 ÷ 12 = $100.00
HOA: $50.00/month

Total monthly payment: $1,896.20 + $300.00 + $100.00 + $50.00 = $2,346.20

Note: Tax, insurance, and HOA fields are optional. Leave them blank for just the P&I figure, or fill them in for a complete monthly total. PMI (private mortgage insurance) — typically required when your down payment is under 20% — isn't included here, since it depends on your specific lender and loan type.

Why the Term Length Matters So Much

Extending a loan term lowers the monthly payment, but dramatically increases total interest paid — because you're paying interest on the remaining balance for far longer. A 15-year loan at the same rate has a meaningfully higher monthly payment, but can cut total interest paid by roughly half compared to a 30-year term.

Does this include property tax and insurance?

No — this calculator shows principal & interest only, which is the portion actually determined by the loan formula. Taxes and insurance vary by location and policy, and are added on top by your lender or servicer.

Why is so much of my early payments interest?

Interest is calculated on the remaining balance each month. Early in the loan, the balance is largest, so the interest portion is largest too. As the balance shrinks over time, more of each fixed payment goes toward principal instead.

Want to see how extra payments speed up your payoff?

Try the Mortgage Payoff Calculator

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