How to calculate a mortgage payment
Here is how to calculate a mortgage payment by hand with a worked example, and a calculator that does the same math and adds taxes, insurance and PMI.
Amortization schedule
| Year | Principal | Interest | Balance |
|---|---|---|---|
| 1 | $3,684.00 | $17,899.80 | $296,316.00 |
| 2 | $3,911.26 | $17,672.54 | $292,404.74 |
| 3 | $4,152.48 | $17,431.32 | $288,252.26 |
| 4 | $4,408.61 | $17,175.19 | $283,843.65 |
| 5 | $4,680.51 | $16,903.29 | $279,163.14 |
| 6 | $4,969.19 | $16,614.61 | $274,193.95 |
| 7 | $5,275.69 | $16,308.11 | $268,918.26 |
| 8 | $5,601.06 | $15,982.74 | $263,317.20 |
| 9 | $5,946.54 | $15,637.26 | $257,370.66 |
| 10 | $6,313.30 | $15,270.50 | $251,057.36 |
| 11 | $6,702.68 | $14,881.12 | $244,354.68 |
| 12 | $7,116.09 | $14,467.71 | $237,238.59 |
| 13 | $7,555.02 | $14,028.78 | $229,683.57 |
| 14 | $8,020.94 | $13,562.86 | $221,662.63 |
| 15 | $8,515.70 | $13,068.10 | $213,146.93 |
| 16 | $9,040.92 | $12,542.88 | $204,106.01 |
| 17 | $9,598.54 | $11,985.26 | $194,507.47 |
| 18 | $10,190.55 | $11,393.25 | $184,316.92 |
| 19 | $10,819.11 | $10,764.69 | $173,497.81 |
| 20 | $11,486.39 | $10,097.41 | $162,011.42 |
| 21 | $12,194.86 | $9,388.94 | $149,816.56 |
| 22 | $12,947.01 | $8,636.79 | $136,869.55 |
| 23 | $13,745.53 | $7,838.27 | $123,124.02 |
| 24 | $14,593.34 | $6,990.46 | $108,530.68 |
| 25 | $15,493.43 | $6,090.37 | $93,037.25 |
| 26 | $16,449.03 | $5,134.77 | $76,588.22 |
| 27 | $17,463.57 | $4,120.23 | $59,124.65 |
| 28 | $18,540.67 | $3,043.13 | $40,583.98 |
| 29 | $19,684.23 | $1,899.57 | $20,899.75 |
| 30 | $20,899.75 | $685.49 | $0.00 |
The formula
Payment = L × r ÷ (1 − (1 + r)^−n), where L is the loan amount, r is the monthly interest rate (the annual rate divided by 12) and n is the number of monthly payments.
Example: a $300,000 loan at 6% for 30 years. The monthly rate is 0.06 ÷ 12 = 0.005 and n is 360. (1.005)^−360 is about 0.1660, so the denominator is 0.8340. The payment is 300,000 × 0.005 ÷ 0.8340 = $1,798.65. That is principal and interest only.
Check it against the schedule
In month one, interest is $300,000 × 0.005 = $1,500, so $298.65 of the first payment reduces the balance. Over 360 payments you repay $647,514.57, of which $347,514.57 is interest. The calculator above is set to this loan with taxes, insurance and PMI switched off, so it should show $1,798.65. Switch them on to see the full payment.
$300,000 loan: 15-year vs 30-year
On a $300,000 mortgage, a 30-year loan at 6% costs $1,798.65 a month in principal and interest and $347,515 in total interest. A 15-year loan at a rate about 0.6 points lower costs $2,435.36 a month, $636.71 more, but cuts the interest to $138,365, saving $209,151. The right choice depends on whether the higher payment fits your budget with room to spare.
| Loan | Principal & interest | Total interest | Total paid |
|---|---|---|---|
| 10-year at 5.4% | $3,240.94 | $88,913 | $388,913 |
| 15-year at 5.4% | $2,435.36 | $138,365 | $438,365 |
| 20-year at 5.4% | $2,046.75 | $191,222 | $491,222 |
| 30-year at 6% | $1,798.65 | $347,515 | $647,515 |
What each 6% ± 1 point does to the payment
A one-point change in your mortgage rate moves the payment on $300,000 by roughly $197.26 a month and the lifetime interest by about $71,009 over 30 years. That is why it pays to compare several lenders on the same day.
| Rate | Principal & interest | Total interest | Difference vs 6% |
|---|---|---|---|
| 5% | $1,610.46 | $279,770 | −$67,746 |
| 5.5% | $1,703.37 | $313,210 | −$34,305 |
| 6% | $1,798.65 | $347,515 | +$0 |
| 6.5% | $1,896.20 | $382,637 | +$35,121 |
| 7% | $1,995.91 | $418,524 | +$71,009 |
Down payment and PMI on a $375,000 home
With less than 20% down, lenders charge private mortgage insurance (PMI), commonly 0.3% to 1.5% of the loan per year. This page assumes 0%. PMI usually ends when you reach 80% of the home's original value, which you can reach sooner with extra payments.
| Down payment | Loan amount | PMI / month | Total monthly payment |
|---|---|---|---|
| 5% ($18,750) | $356,250 | $0.00 | $2,135.90 |
| 10% ($37,500) | $337,500 | $0.00 | $2,023.48 |
| 20% ($75,000) | $300,000 | $0.00 | $1,798.65 |
What income does a $375,000 home need?
Lenders often look at a front-end ratio of about 28% of gross income for housing costs. A total payment of $1,798.65 implies a gross income near $77,000 a year, and lenders also weigh your other debts, which usually must keep total payments under about 36% to 43% of income.
In the first year, $17,900 of your payments goes to interest and only $3,684 to principal, so equity builds slowly at first.
How fast you build equity
Equity here is the home price minus the loan balance, assuming the price stays flat. Appreciation, if any, would add to it.
| After | Loan balance | Principal repaid | Equity (flat value) |
|---|---|---|---|
| 5 years | $279,163 | $20,837 | $95,837 |
| 10 years | $251,057 | $48,943 | $123,943 |
| 15 years | $213,147 | $86,853 | $161,853 |
| 20 years | $162,011 | $137,989 | $212,989 |
Frequently asked questions
What is included in the payment formula?
Only principal and interest. Property tax, homeowners insurance, HOA dues and mortgage insurance are added on top, usually through escrow.
How do I calculate the payment with taxes and insurance?
Divide the annual property tax and insurance by 12 and add them to the principal-and-interest payment, along with any PMI and HOA dues.
What is the monthly payment on a $300,000 mortgage?
At 6% over 30 years, principal and interest on $300,000 is $1,798.65. With the estimated tax, insurance, HOA and PMI above, the total comes to about $1,798.65 a month.
What is included in a monthly mortgage payment?
Principal and interest are the loan itself. Many lenders also collect property tax and homeowners insurance in escrow, and charge PMI if your down payment is under 20%. HOA dues are paid separately.
Related calculators
Estimates from standard loan formulas, not a loan offer or financial advice. Example rates are assumptions: use your own quote.