How to Calculate Mortgage Payments
Your monthly mortgage payment is determined by several key factors: the price of the home, your down payment, the interest rate, the loan term, property taxes, homeowners insurance, and any additional costs such as PMI or HOA dues. Understanding how each of these elements contributes to the total can help you estimate your payment more accurately.
1. Start with the home price and down payment
Subtract your down payment from the home price to determine the loan amount. For example, a $400,000 home with an $80,000 down payment results in a $320,000 mortgage.
2. Choose the loan term and interest rate
Most fixed-rate mortgages in the U.S. are set for 30 or 15 years. The interest rate and loan term determine the principal and interest portion of your monthly payment. Shorter terms have higher monthly payments but lower total interest costs.
3. Account for property taxes and homeowners insurance
These costs vary by state and local tax rates. Many lenders include taxes and insurance in your monthly payment through an escrow account. Entering your annual amounts helps estimate your full monthly housing cost.
4. Include PMI or HOA dues when applicable
Private mortgage insurance (PMI) is typically required when the down payment is less than 20%. Homes located within communities may also include homeowners association (HOA) dues. These optional fields help provide a more complete payment estimate.
5. Review the monthly payment breakdown
The calculator separates your monthly payment into principal & interest, property tax, insurance, PMI, HOA dues, and any extra principal payments. This detailed breakdownhelps you understand exactly where your money goes each month.
6. See how the loan balance changes over time
Visual charts illustrate how your balance decreases, how much interest you pay over the life of the loan, and how your payment shifts between principal and interest. This helps you compare different scenarios and understand long-term costs.
By following these steps and entering accurate information, you can get a clear, realistic estimate of your total monthly mortgage payment and how each factor influences your overall housing budget.
The Mortgage Formula
In the United States, mortgage lenders calculate your monthly payment M using this standard amortization formula:
M = P × [ r(1 + r)n / ((1 + r)n − 1) ]
Where:
- M = monthly mortgage payment (principal + interest)
- P = loan amount (principal)
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of monthly payments (loan term in years × 12)
In simple terms, this formula spreads your loan amount and interest into equal monthly payments over the full length of your mortgage.
Types of Home Loans
| Loan Type | Best For | Key Features (USA Market) |
|---|---|---|
| Conventional Loan | Borrowers with solid credit and steady income | 3–5% minimum down, PMI required under 20% equity, PMI removable at 20%, subject to conforming loan limits |
| FHA Loan | First-time buyers or lower credit scores | 3.5% minimum down with qualifying credit, flexible approval, upfront + annual mortgage insurance required |
| VA Loan | Eligible active-duty military, veterans, and qualifying spouses | 0% down option, no monthly mortgage insurance, VA funding fee applies unless exempt |
| USDA Loan | Low-to-moderate income buyers in eligible rural/suburban areas | 0% down, low mortgage insurance, must meet income and location rules |
| Jumbo Loan | Buyers purchasing homes above conforming loan limits | Higher credit and income requirements, larger down payments typically required |
| Fixed-Rate Mortgage | Anyone wanting stable, predictable monthly payments | Rate never changes, common terms include 15-year and 30-year options |
| Adjustable-Rate Mortgage (ARM) | Buyers planning to sell or refinance before the rate adjusts | Lower intro rate, adjusts after initial period (5/1, 7/1, 10/1), payments may increase over time |
| Interest-Only Mortgage | Experienced borrowers or short-term buyers | Lower initial payments, significant payment increase after interest-only phase |
| Non-QM Loan | Borrowers with unique or nontraditional income documentation | Includes bank-statement, asset-based, and DSCR loans; flexible underwriting but higher rates |
Mortgage Key Terminology Explained
| Term | Meaning (U.S. Definition) |
|---|---|
| Principal | The amount of money borrowed for the mortgage, excluding interest. |
| Interest | The cost of borrowing the loan, charged by the lender. |
| APR (Annual Percentage Rate) | Total yearly cost of the mortgage, including interest + certain lender fees. |
| Amortization | The payment schedule showing how each payment is split between principal and interest over time. |
| Mortgage Term | The loan length, typically 15 or 30 years in the U.S. |
| Escrow Account | Lender-managed account used to pay property taxes and homeowners insurance. |
| PMI (Private Mortgage Insurance) | Insurance on conventional loans when the down payment is <20%. |
| MIP (Mortgage Insurance Premium) | Required mortgage insurance for FHA loans, includes upfront + annual fees. |
| Down Payment | Upfront amount paid toward the home’s purchase price (typically 3%–20%). |
| Equity | The portion of the home you own — home value minus loan balance. |
| LTV (Loan-to-Value Ratio) | Loan amount divided by the home’s value; affects rates and approval. |
| DTI (Debt-to-Income Ratio) | Percentage of monthly income going toward debt; used in approval. |
| Rate Lock | A guarantee that your interest rate will stay the same for a set timeframe (e.g., 30–60 days). |
| Closing Costs | Fees required to finalize the purchase, typically 2%–5% of the home price. |
| Earnest Money Deposit (EMD) | A good-faith deposit submitted with an offer to show serious intent to buy. |
| Prequalification | A quick estimate of what you may be able to borrow, based on basic financial info. |
| Preapproval | A lender verifies income, credit, and assets to provide a conditional approval amount. |
| Loan Estimate (LE) | A standardized form showing estimated loan terms, payments, and closing costs. |
| Closing Disclosure (CD) | The final document outlining the exact payment, terms, and closing costs. |
| Underwriting | The lender’s process of reviewing and verifying financial documentation before approval. |
| Conforming Loan | A conventional loan that meets FHFA limits and requirements. |
| Non-Conforming Loan | A loan that does not meet FHFA standards, including jumbo loans. |
| Jumbo Loan | A mortgage above conforming loan limits; requires stronger credit and higher down payment. |
| ARM (Adjustable-Rate Mortgage) | Loan with a fixed intro rate that adjusts periodically (e.g., 5/1 ARM). |
| Fixed-Rate Mortgage | Loan where the interest rate stays the same for the entire loan term. |
| Interest-Only Mortgage | Borrower pays only interest for a set period before full payments begin. |
| Points (Discount Points) | Optional upfront fees paid to reduce the interest rate (1 point = 1% of loan amount). |
| Origination Fee | A fee charged by the lender for processing and creating the loan. |
| Appraisal | Professional estimate of the home’s market value required by lenders. |
| Title Insurance | Protects against legal issues with property ownership or title claims. |
| Closing (Settlement) | The final step where ownership transfers and the loan is funded. |
| Funding Fee (VA) | A one-time fee for VA loans, unless the borrower is exempt. |
| USDA Guarantee Fee | Upfront + annual fee on USDA loans, similar to mortgage insurance. |
| PITI | Monthly payment including Principal, Interest, Taxes, Insurance. |
| Cash-to-Close | Total amount a buyer must bring to closing, including down payment + closing costs. |
| Forbearance | Temporary pause or reduction in mortgage payments granted by the lender. |
| Refinance | Replacing an existing mortgage with a new one, usually for a lower rate or payment. |
| Home Equity Line of Credit (HELOC) | A revolving credit line using home equity as collateral. |
| Second Mortgage | An additional loan secured against the home, behind the first mortgage. |
| Balloon Mortgage | Loan with lower initial payments followed by a large final payment. |
| Escrow Shortage/Surplus | When the escrow account has too little or too much to cover taxes/insurance. |
| Default | Failure to make required mortgage payments. |
| Foreclosure | Legal process where the lender takes possession of the home after default. |
Explore more mortgage calculators
Run quick scenarios to compare loan options and plan your monthly budget.
FHA mortgage calculator
Calculate your mortgage payments on an FHA home loan.
VA mortgage calculator
See estimated monthly mortgage costs for a VA loan.
Refinance calculator
Check if refinancing your mortgage makes financial sense.
Affordability calculator
Find out how much home you can comfortably afford.
Frequently Asked Questions
What does a mortgage calculator do?
A mortgage calculator estimates your monthly house payment based on the home price, down payment, interest rate, loan term, taxes, insurance, PMI, and HOA fees.
How accurate is this mortgage calculator?
The calculator gives a close estimate based on standard U.S. mortgage formulas. Your final payment may vary depending on your lender, credit profile, mortgage insurance, and local property taxes.
What is included in my monthly mortgage payment?
A complete monthly payment typically includes:
Principal
Interest
Property taxes
Homeowners insurance
PMI or MIP (if required)
HOA dues (if applicable)
Extra principal payments (optional)
What is principal and interest (P&I)?
P&I is the core mortgage payment: the amount going toward the loan balance (principal) and the amount paid to the lender (interest).
How do property taxes affect my mortgage payment?
Property taxes are usually collected monthly through an escrow account. The calculator estimates a monthly tax amount by dividing annual taxes by 12.
What is PMI and when is it required?
PMI (Private Mortgage Insurance) applies to most conventional loans when the down payment is less than 20%. PMI can usually be removed once you reach 20% equity.
Why does my payment change when I adjust the interest rate?
Interest rate changes impact how much interest you pay monthly. Even a small rate change (like 6.5% → 6.25%) can make a noticeable difference in your payment.
What is an FHA, VA, or USDA loan and does this calculator support them?
Yes – the calculator supports these loan types:
FHA: calculated with MIP
VA: includes VA funding fee
USDA: includes guarantee fee
Conventional: PMI options
Your input determines the scenario; the calculator adapts accordingly.
How does extra principal payment affect my loan?
Adding extra principal each month:
Reduces your loan balance faster
Shortens your payoff timeline
Saves thousands in interest over the life of the loan
The calculator shows your interest savings and new payoff date.
Can this calculator help me compare different loan types?
Yes. You can test multiple scenarios by adjusting home price, interest rate, down payment, PMI, taxes, and more. It’s useful for comparing conventional, FHA, VA, and USDA options.
What loan terms can I calculate (15-year vs. 30-year)?
You can calculate any loan term, but most U.S. homebuyers choose:
30-year fixed (lower payment)
15-year fixed (faster payoff + lower interest)
Both options are supported.
What is the difference between APR and interest rate?
Interest rate: cost of borrowing the money
APR: interest rate plus certain fees
Most mortgage calculators use the interest rate for payment calculations.
Does the calculator estimate closing costs?
This calculator focuses on monthly payments. Closing costs vary by lender and location, usually 2%–5% of the purchase price.
Can the calculator estimate if I qualify for a mortgage?
No – qualification depends on:
Credit score
Income
DTI (debt-to-income ratio)
Employment history
For approval, a lender must review your full financial profile.
Does refinancing change the calculations?
Yes. When refinancing, you’ll compare:
New interest rate
New loan term
Remaining balance
Closing costs
The calculator can still estimate new monthly payments and interest savings.