How to Calculate a Mortgage Payment
Your monthly mortgage payment is made up of principal, interest, and often property taxes and insurance. Understanding how it's calculated helps you compare loans and plan a budget.
Step-by-step
- 1
Determine the loan amount
Subtract your down payment from the home price to find the amount you're financing.
- 2
Enter the interest rate and term
Use the annual interest rate and the loan term in years (commonly 15 or 30).
- 3
Calculate the monthly payment
Apply the amortization formula or use a mortgage calculator to get the principal and interest payment.
- 4
Add taxes and insurance
Add estimated monthly property taxes and insurance to get your total payment.
What's in a mortgage payment
Principal is the amount you borrowed. Interest is the cost of borrowing. Property taxes and homeowner's insurance are often escrowed and added to the payment. Some loans also include private mortgage insurance (PMI).
How the interest rate changes your payment
Interest is usually the largest hidden cost. Even a small increase in rate can add tens of thousands to the total paid over a 30-year loan, so it's worth comparing offers.
15-year vs. 30-year loans
A 15-year loan has a higher monthly payment but much lower total interest. A 30-year loan is more affordable month to month but costs more over the life of the loan.
Frequently Asked Questions
What's included in a mortgage payment?
It typically includes principal, interest, property taxes, and insurance. Some loans also include PMI.
Should I choose a 15-year or 30-year mortgage?
A 15-year loan saves more on interest but has higher monthly payments. A 30-year loan has lower payments but higher total interest.
How much down payment do I need?
It varies, but many conventional loans require at least 3–20%. A larger down payment lowers your loan amount and monthly payment.