Calculating Mortgage Payment

Reviewed by: **David Chen, CFA** | Last Updated: December 2025

Use this calculator to quickly estimate your monthly mortgage payment, total interest paid, and the overall cost of the loan. Understanding these figures is crucial for effective personal financial planning and budgeting.

Mortgage Payment Calculator

Loan Amount (Principal $P$)

Annual Interest Rate ($R$, %)

Loan Term (Years $Y$)

ESTIMATED MONTHLY PAYMENT

$0.00

Total Interest Paid:
Total Loan Cost:

Show Calculation Steps

Detailed Calculation Steps

Mortgage Payment Formula

Monthly Payment ($M$) Calculation

$$M = P \frac{r(1+r)^n}{(1+r)^n – 1}$$

Formula Source 1 | Formula Source 2

Variables Explained

**$P$ (Principal Loan Amount):** The total amount borrowed from the lender. This is the home price minus any down payment.
**$R$ (Annual Interest Rate):** The stated yearly percentage rate for the loan. This is used to derive the monthly rate.
**$Y$ (Loan Term in Years):** The duration over which the loan is repaid, typically 15 or 30 years.
**$r$ (Monthly Interest Rate):** Calculated as $R / 1200$.
**$n$ (Total Number of Payments):** Calculated as $Y \times 12$.

What is a Mortgage Payment?

A mortgage payment is the monthly installment required to repay a home loan. The payment is composed primarily of two parts: **Principal** and **Interest**. In the early years of a loan, the interest portion is significantly higher than the principal. As the loan matures, this ratio gradually reverses, with more of the payment going toward reducing the principal balance.

The calculated amount above represents the ‘P&I’ portion (Principal and Interest). Your actual, full monthly housing cost, often referred to as PITI, can include additional amounts for property taxes, homeowner’s insurance, and sometimes Private Mortgage Insurance (PMI), which are held in an escrow account by the lender.

How to Calculate Mortgage Payment (Example)

Let’s walk through an example for a $200,000 loan over 30 years at 4.5% interest:

**Determine Variables:** $P = \$200,000$, Annual $R = 4.5\%$, Term $Y = 30$ years.
**Calculate Monthly Rate ($r$):** Divide the annual rate by 1200: $r = 4.5 / 1200 = 0.00375$.
**Calculate Total Payments ($n$):** Multiply the term by 12: $n = 30 \times 12 = 360$.
**Calculate the Payment Factor:** Use the complex $\frac{r(1+r)^n}{(1+r)^n – 1}$ factor. $(1+0.00375)^{360} \approx 3.840$. The factor is $0.00375 \times 3.840 / (3.840 – 1) \approx 0.0050668$.
**Calculate Monthly Payment ($M$):** Multiply the Principal by the factor: $M = \$200,000 \times 0.0050668 \approx \$1,013.36$.

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Frequently Asked Questions (FAQ)

What is the difference between APR and the Interest Rate?

The Annual Percentage Rate (APR) includes the interest rate plus any fees, points, or costs associated with the loan, giving a more comprehensive picture of the true cost of borrowing. The interest rate is just the cost of borrowing the principal.

Does this calculator include property taxes and insurance?

No. This tool calculates only the Principal and Interest (P&I) portion of the mortgage payment. You must manually account for taxes, insurance, and PMI when budgeting for your total monthly housing expenses (PITI).

What is an amortization schedule?

An amortization schedule is a table showing the principal and interest paid over the life of the loan. It clearly demonstrates how the interest portion decreases and the principal portion increases with each subsequent payment.

How does a shorter loan term (e.g., 15 years) affect the payment?

A shorter term typically results in a higher monthly payment because the principal is paid back faster, but it significantly reduces the total amount of interest paid over the life of the loan, saving substantial money overall.