Reviewed by: David Chen, CFA
Certified Financial Analyst and Real Estate Specialist.
Use this monthly mortgage payment calculator to quickly estimate your principal and interest (P&I) payment based on the loan amount, interest rate, and term. This tool helps you budget and understand the impact of various loan scenarios on your finances.
Monthly Mortgage Payment Calculator
This payment includes Principal and Interest only.
Detailed Calculation Steps
Monthly Mortgage Payment Formula
The standard formula used to calculate the fixed monthly payment (M) for a loan with fixed interest rates is based on the annuity formula. This calculation determines the principal and interest portion of your payment.
$$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$$
Formula Sources: Investopedia: Mortgage, Khan Academy: Mortgage Calculations
Variables
- Loan Amount (P): The principal amount borrowed (e.g., $250,000).
- Annual Interest Rate (R, %): The yearly rate charged by the lender (e.g., 6.5%).
- Loan Term (Years, Y): The length of time to repay the loan (e.g., 30 years).
- Monthly Interest Rate (r): The annual rate divided by 12, as a decimal.
- Total Number of Payments (n): The loan term in months ($Y \times 12$).
Related Calculators
- Loan Amortization Schedule Calculator
- Mortgage Refinance Savings Calculator
- Home Affordability Calculator
- Debt-to-Income Ratio (DTI) Calculator
What is a Monthly Mortgage Payment?
Your monthly mortgage payment is the fixed amount you pay to your lender, which is primarily composed of principal (repaying the loan amount) and interest (the cost of borrowing). This calculation, often called P&I, is the core focus of this calculator.
It is crucial to remember that a borrower’s total housing expense often includes PITI: Principal, Interest, Taxes, and Insurance. While this calculator provides the accurate P&I figure, you must factor in estimated taxes and insurance to determine your true monthly obligation.
How to Calculate a Monthly Mortgage Payment (Example)
We use the example $P = \$250,000$, $R = 6.5\%$, and $Y = 30$ years.
- Convert Rate and Term:
- Monthly Rate ($r$): $(6.5 / 100) / 12 \approx 0.005416667$
- Total Payments ($n$): $30 \times 12 = 360$ months
- Calculate Term Power: Compute $(1+r)^n = (1.005416667)^{360} \approx 6.9691$
- Apply the Formula Components:
- Numerator: $r \times 6.9691 \approx 0.03775$
- Denominator: $6.9691 – 1 \approx 5.9691$
- Final Calculation: $$M = \$250,000 \times \frac{0.03775}{5.9691} \approx \$1,580.19$$
Frequently Asked Questions (FAQ)
The Interest Rate is the cost of borrowing the principal amount. The Annual Percentage Rate (APR) is a broader measure of the cost of the loan, including the interest rate plus certain other charges (like origination fees), expressed as a yearly percentage.
A larger down payment reduces the Principal Loan Amount (P). Since the monthly payment is directly proportional to P, a smaller loan amount results in a lower monthly payment and less total interest paid.
Yes. By making extra principal payments, you reduce the loan balance faster. This cuts down the time it takes to repay the loan and significantly lowers the total interest you will pay over the life of the mortgage, provided there are no prepayment penalties.
Under an amortization schedule, interest is calculated on the remaining principal balance. Since the balance is highest at the start of the loan, the interest charged is also highest, gradually shifting the payment to mostly principal toward the end of the term.