How to Calculate Your Mortgage Payment (Step by Step)
By Akash · 6 min read · Published 2026-02-16
Calculating your monthly mortgage payment is a crucial step in the home-buying process. It helps you understand how much house you can afford and how your loan will be paid off over time. While our mortgage calculator can do the math for you, understanding the formula gives you deeper insight into your finances.
The Mortgage Payment Formula
The formula to calculate the principal and interest portion of your monthly mortgage payment is:
Where:
- M = Monthly mortgage payment
- P = Principal loan amount (the amount you borrow)
- i = Monthly interest rate (annual rate ÷ 12)
- n = Total number of payments (years × 12)
Understanding PITI
Your total monthly mortgage payment is often referred to as PITI:
- Principal — pays down your loan balance
- Interest — the cost of borrowing
- Taxes — monthly property taxes
- Insurance — homeowners insurance premium
If your down payment is less than 20%, your payment may also include Private Mortgage Insurance (PMI).
Worked Example
Let's say you want to buy a $300,000 home with a $60,000 down payment (20%). Your principal loan amount is $240,000.
With a 30-year fixed-rate mortgage at 6.09% (current average):
- P = $240,000
- i = 0.0609 / 12 = 0.005075
- n = 30 × 12 = 360
M ≈ $1,449/month
That's just principal and interest. Add property taxes (~$250/mo) and insurance (~$100/mo) for a total PITI of roughly $1,799/month.
How Amortization Works
In the early years of your mortgage, most of your payment goes toward interest. Over time, as the principal decreases, more of each payment is applied to principal. This gradual shift is called amortization.
By year 15 of a 30-year mortgage, you'll typically be paying roughly equal amounts of principal and interest. By the final years, nearly all of your payment goes toward principal.
Factors That Affect Your Payment
| Factor | Effect on Payment |
|---|---|
| Higher home price | ↑ Increases payment |
| Larger down payment | ↓ Decreases payment |
| Lower interest rate | ↓ Decreases payment |
| Shorter loan term | ↑ Higher monthly, but less total interest |
| PMI (if <20% down) | ↑ Adds to monthly payment |
Tips to Lower Your Mortgage Payment
- Increase your down payment — even 1% more can make a difference
- Shop around for rates — compare at least 3–5 lenders
- Improve your credit score — a higher score means a lower rate
- Consider a longer term — 30 years vs. 15 years (but you'll pay more interest overall)
- Buy discount points — pay upfront to lower your rate