How we calculate mortgage payments

Step-by-step

1. 1

   Determine the loan principal (P): the home price minus the down payment.

2. 2

   Determine the monthly interest rate (r): divide the annual rate by 12 (e.g. 6% APR → 0.005 per month).

3. 3

   Determine the number of payments (n): multiply the loan term in years by 12 (e.g. 30 years → 360 payments).

4. 4

   Compute (1+r)ⁿ: the compounding factor over the loan life.

5. 5

   Apply the formula: P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1]. The result is the monthly principal + interest payment.

6. 6

   Add property taxes, home insurance, and PMI (if applicable) to get the full PITI payment.

Authoritative sources

Every claim on this page is backed by an authoritative source.

• CFPB — Mortgage Interest Rates →
• Federal Reserve — What is a mortgage →
• Investopedia — Amortization Calculation →

Assumptions

What we take to be true when applying this formula.

• Fixed-rate mortgage. For ARMs, the rate after the fixed period changes the result.

• Equal monthly payments. Some mortgages allow biweekly or other schedules.

• Interest is compounded monthly (standard for US mortgages).

• No prepayments. Extra payments reduce the principal and shorten the loan term.

Limitations

What this method does NOT capture.

• This calculator estimates P&I only. The full PITI payment includes property taxes and insurance (typically 15–35% extra).

• Closing costs, HOA fees, and maintenance are not included in the monthly payment.

• For ARMs, the actual payment will change after the initial fixed period.

• Regional variations in taxes and insurance can substantially change total housing cost.

Last reviewed: 2026-06-15 • Reviewed by: CalcxApp editorial team