How to Calculate a Mortgage Payment: Formula, Examples & Free Calculator
Knowing how to calculate a mortgage payment before you apply puts you in control. You'll understand exactly what drives your monthly cost, how the math changes with different loan types, and where a lender can make a difference. This guide walks through the formula, shows worked examples, and explains every line item in your payment.
The Basic Mortgage Payment Formula (P&I Only)
The principal and interest portion of your mortgage payment uses the standard amortization formula:
M = P × [r(1+r)^n] ÷ [(1+r)^n − 1]
Where: M = monthly payment, P = loan amount (principal), r = monthly interest rate (annual rate ÷ 12), n = total number of payments (loan term in years × 12)
Example: $340,000 loan, 6.5% rate, 30-year term. r = 6.5% ÷ 12 = 0.5417%. n = 360 payments. M = $2,149/month for principal and interest.
This formula gives you the P&I only, your actual monthly payment will be higher once you add taxes, insurance, and mortgage insurance.
Full PITI Payment, What Gets Added
Your real monthly payment includes four components, which is why lenders use the acronym PITI:
P, Principal: The portion that reduces your loan balance. In early years, this is the smallest slice.
I, Interest: The cost of borrowing. In early years, this is the largest slice, over time the ratio flips as you build equity.
T, Taxes: Property taxes, typically divided by 12 and collected monthly into an escrow account. Varies by county, commonly 0.5% to 2% of home value per year.
I, Insurance: Homeowner's insurance, also escrowed monthly. Roughly 0.25% to 0.5% of home value per year.
Example: $340,000 loan at 6.5% for 30 years. P&I = $2,149. Taxes = $354/mo. Insurance = $142/mo. Total PITI = $2,645/month.
FHA Loan Payment Calculation
FHA loans add a monthly Mortgage Insurance Premium (MIP) to the PITI calculation.
FHA MIP = (Loan amount × 0.55%) ÷ 12 for most 30-year loans with less than 10% down.
Example: $325,000 FHA loan (3.5% down on $337,000 home) at 6.75% for 30 years. P&I = $2,108. Taxes = $337/mo. Insurance = $126/mo. MIP = $149/mo. Total = $2,720/month.
Unlike PMI on conventional loans, FHA MIP cannot be cancelled if your down payment was less than 10%, it lasts for the life of the loan. This is why many buyers with improving credit scores refinance out of FHA once they reach 20% equity.
Conventional Loan with PMI
Conventional loans with less than 20% down require Private Mortgage Insurance (PMI).
PMI rates typically range from 0.2% to 1.5% of the loan amount per year depending on credit score and LTV ratio.
Example: $360,000 conventional loan (10% down on $400,000 home) at 6.875% for 30 years. P&I = $2,364. Taxes = $400/mo. Insurance = $150/mo. PMI (~0.8%) = $240/mo. Total = $3,154/month.
PMI cancels automatically when your loan balance reaches 78% of the original purchase price. Unlike FHA MIP, you can also request cancellation at 80% LTV.
How Loan Term Affects Your Payment
The loan term has a dramatic effect on your monthly payment and total interest paid:
30-year loan: Lower monthly payment, more total interest. Best for: buyers maximizing monthly cash flow.
15-year loan: Higher monthly payment (roughly 40–50% more), but dramatically less total interest. Best for: buyers who want to build equity faster and pay less overall.
Example on $300,000 at 6.5%: 30-year = $1,896/mo, total interest = $382,600. 15-year = $2,613/mo, total interest = $170,250. The 15-year saves $212,350 in interest, but costs $717 more per month.
Common Questions
How much is a mortgage payment on a $300,000 house?
On a $300,000 home with 20% down ($60,000), a 30-year loan at 7% gives a P&I payment of about $1,596/month. Add estimated taxes ($300/mo) and insurance ($113/mo) for a total PITI of roughly $2,009/month. With 3.5% FHA down and 6.75% rate, the payment would be higher due to a larger loan and MIP.
What is the monthly payment on a $400,000 mortgage?
A $400,000 mortgage at 7% for 30 years has a principal and interest payment of $2,661/month. Total PITI including taxes and insurance runs approximately $3,200–$3,400/month depending on your location and insurance costs.
How do I lower my monthly mortgage payment?
The four ways to lower your payment: (1) Make a larger down payment to reduce the loan amount. (2) Buy at a lower price point. (3) Secure a lower interest rate through better credit or by shopping lenders. (4) Extend the loan term, though this increases total interest paid. Refinancing can also lower your payment if rates have dropped since you originated.
Get a Conventional Loan in your state
Ready to take the next step?
A licensed HCMG loan officer will walk you through your exact scenario, your credit, income, down payment, and goals, and tell you what you qualify for, with no hard credit check.