How this mortgage calculator works
A mortgage payment has two layers. The first is principal and interest, which pays back the loan itself. It stays the same every month on a fixed-rate loan. The second layer is everything else your lender collects: property tax, homeowners insurance, HOA dues and, if you put down less than 20%, private mortgage insurance (PMI). Lenders often hold that money in an escrow account and pay the bills for you.
This calculator adds all of those pieces so the number you see is closer to a real monthly bill than the principal-and-interest figure that many calculators show on its own. Everything runs in your browser, and the formulas below are exactly the ones it uses.
The formula, and what every variable means
Principal and interest use the standard amortization formula for a fixed-rate loan:
M = P × r ÷ (1 − (1 + r)−n)
| Symbol | Meaning | How it is found |
|---|---|---|
| M | Monthly principal and interest payment | The result of the formula |
| P | Principal: the amount you borrow | Home price minus down payment |
| r | Monthly interest rate | Annual rate ÷ 12 ÷ 100 (6.5% becomes 0.005417) |
| n | Number of monthly payments | Years × 12 (30 years is 360) |
The rest of the monthly total is simple addition:
| Part | How it is calculated |
|---|---|
| Property tax | Home price × annual tax rate ÷ 12 |
| Home insurance | Annual premium ÷ 12 |
| HOA dues | Entered as a monthly amount |
| PMI | Loan amount × annual PMI rate ÷ 12, only while your balance is above 80% of the original price |
Doing it by hand: $300,000 at 6.5% for 30 years
- Monthly rate: r = 6.5 ÷ 100 ÷ 12 = 0.005417.
- Number of payments: n = 30 × 12 = 360.
- Growth factor: (1 + r)n = 1.005417360 ≈ 6.9918.
- Denominator: 1 − 1 ÷ 6.9918 ≈ 0.8570.
- Payment: $300,000 × 0.005417 ÷ 0.8570 ≈ $1,896.20 per month.
- Total interest over the loan: $1,896.20 × 360 − $300,000 ≈ $382,633.
Why early payments are mostly interest
Interest is charged each month on the balance you still owe. In the first month of the loan above, interest is $300,000 × 0.005417 = $1,625.00, so only about $271.20 of your $1,896.20 payment reduces the loan. In year 1, 85% of what you pay is interest. By year 15 that has fallen to 63%, and in the final year it is 3%. The schedule above shows this year by year for your own numbers.
Three worked examples
Example A: a first-time buyer with 5% down
A $350,000 home with $17,500 down (5%), a 6.75% rate, a 30-year term, 1.1% property tax, $1,800 a year in insurance and PMI at 0.6% a year. Because the down payment is under 20%, PMI applies.
| Part | Per month |
|---|---|
| Principal and interest on $332,500 | $2,156.59 |
| Property tax | $320.83 |
| Home insurance | $150.00 |
| PMI | $166.25 |
| Total | $2,793.67 |
The principal-and-interest number alone ($2,157) understates the real bill by $637 a month. PMI in this example lasts about 10 years, 7 months, until the balance falls to 80% of the price.
Example B: 30 years or 15 years?
A $400,000 home with 20% down leaves a $320,000 loan. The 30-year loan uses 6.5%. For the 15-year loan we assume a lower rate of 5.9%, because shorter loans are usually priced lower (your own quotes will differ).
| 30 years at 6.5% | 15 years at 5.9% | |
|---|---|---|
| Principal and interest | $2,022.62 | $2,683.08 |
| Total interest | $408,142 | $162,955 |
The 15-year loan costs $660 more each month but saves about $245,187 in interest. Whether that trade is worth it depends on how comfortably you can carry the higher payment.
Example C: what an extra $200 a month does
Take the $300,000 loan at 6.5% for 30 years and add $200 to every payment, applied to principal.
| Regular payments | With $200 extra | |
|---|---|---|
| Time to pay off | 30 years | 23 years, 1 month |
| Total interest | $382,633 | $279,185 |
That is $103,449 saved in interest and 6 years, 11 months taken off the loan, for $200 a month. Because the savings come from the early, interest-heavy years, the sooner you start the more it is worth.
How much does the interest rate matter?
The same $300,000 loan over 30 years at different rates:
| Rate | Monthly principal and interest | Total interest |
|---|---|---|
| 5.5% | $1,703.37 | $313,212 |
| 6% | $1,798.65 | $347,515 |
| 6.5% | $1,896.20 | $382,633 |
| 7% | $1,995.91 | $418,527 |
| 7.5% | $2,097.64 | $455,152 |
Each half-point moves the payment by roughly $100 a month and the total interest by tens of thousands of dollars over the life of the loan. Getting quotes from several lenders is one of the highest-value things you can do.
Common mistakes to avoid
- Budgeting with principal and interest only. Taxes, insurance, HOA and PMI can add hundreds of dollars a month.
- Using the seller's property tax bill. A sale can trigger a reassessment, so ask what your tax will be.
- Comparing offers on rate alone. Compare the Loan Estimates, including fees and points.
- Assuming extra payments go to principal. Ask your servicer how to designate them, or the money may simply prepay next month's bill.
- Forgetting the costs around the loan. Closing costs, moving, repairs and a cash cushion all matter.
What lowers your total cost
- A larger down payment reduces the loan, the interest and the chance of paying PMI.
- A shorter term raises the monthly payment but cuts total interest sharply.
- A lower rate matters more than most people expect. Compare offers from several lenders.
- Extra principal payments shorten the loan. Use the extra payment box to test amounts.
Tip: check that any extra payment is applied to principal and not to the next month's payment. Ask your servicer how to designate it.
What this calculator does not include
Closing costs, points, mortgage insurance on FHA or VA loans, adjustable rates, and changes in property tax or insurance over time are not modeled. Your lender's Loan Estimate is the authoritative source for an actual offer. Wondering whether paying points is worth it? See whether mortgage points are worth it. See also our guide to how mortgage payments work, or check what you can afford with the house affordability calculator.
Sources and review
The payment formula is the standard fixed-rate amortization formula, unit-tested against closed-form results. The Consumer Financial Protection Bureau explains what PITI is (principal, interest, taxes and insurance), escrow accounts, how mortgage insurance works (typically needed with a down payment under 20% of the price, and on FHA and USDA loans) and removing PMI. For more plain-language buyer guidance see the CFPB's Owning a Home tools. Last reviewed September 2026. New to buying? Follow the first-time home buyer guide, and compare lenders with the loan offer comparison calculator. Read about our methodology.