How the monthly mortgage payment is calculated
The principal-and-interest part uses the standard amortization formula:
P = loan amount, r = annual rate ÷ 12, n = number of monthly payments.
Most lenders also collect property tax and homeowners insurance each month through an escrow account. Together these four pieces are called PITI: principal, interest, taxes, and insurance. PMI and HOA dues can add more.
Example
A $350,000 home with $35,000 down (10%) leaves a $315,000 loan. At 6.5% for 30 years, principal and interest is about $1,991 a month. Add 1.1% property tax ($321/month), $1,800/year insurance ($150/month), and 0.5% PMI ($131/month) for a total near $2,593.
Ways to lower the payment
- Put 20% down to avoid PMI on most conventional loans.
- Compare lenders — a small rate difference changes the payment and total interest a lot.
- Shop insurance and check local property-tax rates before choosing a home.
- Extra principal payments shorten the loan and cut total interest. Try $100 or $200 in the extra-payment field.
New to the terms? Read what goes into a mortgage payment.
Mortgage Calculator FAQs
What is included in a mortgage payment?
Usually principal and interest, plus property tax and homeowners insurance held in escrow. PMI and HOA dues may also apply.
When do I have to pay PMI?
Conventional loans typically require private mortgage insurance when the down payment is less than 20% of the home price. It can often be removed once you reach enough equity.
How much house can I afford?
Many lenders look at your debt-to-income ratio. A common guideline keeps the total housing payment around 28% of gross monthly income, but lenders' limits vary.
Do extra payments really help?
Yes. Extra money applied to principal reduces the balance faster, which lowers the interest charged in later months and shortens the loan.