October 20, 2026 · Home Finance · 6 min read

How to Calculate Your Monthly Mortgage Payment

Your monthly mortgage payment is the single biggest number in most household budgets, yet many buyers sign up for one without ever seeing how it is calculated. The good news: the math behind a mortgage is a single, well-defined formula. Once you understand it, you can estimate any loan in seconds and sanity-check the quotes your bank gives you.

What is actually in a mortgage payment?

Lenders usually talk about PITI, which stands for four components:

Principal — the part of the payment that pays down the loan balance.
Interest — the lender's charge on the remaining balance.
Taxes — property taxes, often collected monthly and paid yearly on your behalf.
Insurance — homeowner's insurance, and possibly mortgage insurance if your down payment is small.

The formula below calculates the principal-and-interest portion. Taxes and insurance are added on top, but they do not change with your loan terms.

The mortgage payment formula

M = P × [ r(1 + r)ⁿ ] / [ (1 + r)ⁿ − 1 ]

Where:

M = monthly payment
P = loan amount (the principal)
r = monthly interest rate = annual rate ÷ 12 ÷ 100
n = number of monthly payments = years × 12

A worked example

Suppose you borrow $300,000 at an annual rate of 6% for 30 years:

r = 6% ÷ 12 = 0.5% = 0.005
n = 30 × 12 = 360 payments
(1.005)³⁶⁰ ≈ 6.0226
M = 300,000 × [0.005 × 6.0226] / [6.0226 − 1] ≈ $1,799 per month

Over 30 years you would pay about $347,000 in interest on top of the original $300,000 — which is why small changes in rate or term matter so much.

What moves the number the most

Interest rate: at 5% instead of 6%, the same $300,000 loan costs about $1,610/month — roughly $190 less, every month, for the life of the loan.
Term: a 15-year loan at 6% costs about $2,532/month, but total interest drops from ~$347,000 to ~$156,000.
Extra principal: paying even $100 extra each month shortens a 30-year loan by several years.

Each of those levers is a percentage move. Model a one-point rate change with the Percentage Calculator before you negotiate with your lender — small shifts compound over 360 payments.

Tip: don't do this by hand. Open the Mortgage Calculator to try your own numbers instantly, or use the Loan EMI Calculator for personal and auto loans.

Quick sanity checks before you sign

Ask the lender for the full PITI amount, not just principal and interest.
Check whether the rate is fixed or adjustable, and when it can change.
Compare the total cost of the loan (payments × number of payments), not just the monthly figure.

For more on installment loans in general — how each payment splits between interest and principal — see Loan EMI Explained: How Your Monthly Installment Works.