How to Calculate Your Mortgage Payment

Your mortgage payment is usually the biggest bill you pay each month, and it is made of more than just the loan. This guide shows how to calculate the principal and interest with the standard formula, then adds property tax, insurance and PMI to give the full monthly payment, often called PITI. It also covers doing it in Excel and how the term changes the cost.

Step 1: the principal and interest payment

The fixed monthly payment on a mortgage uses the amortization formula:

M = P × r ÷ (1 − (1 + r)^−n)

M is the monthly payment (principal and interest).
P is the loan amount, which is the price minus your down payment.
r is the monthly interest rate: the annual rate ÷ 12.
n is the number of payments: years × 12.

Worked example

You buy a home for $400,000 with 20% down, so the loan is $320,000, at 6.75% for 30 years.

Monthly rate: 0.0675 ÷ 12 = 0.005625.
Number of payments: 30 × 12 = 360.
(1 + r)^−n = 1.005625⁻³⁶⁰ ≈ 0.1327.
Payment: 320,000 × 0.005625 ÷ (1 − 0.1327) = $2,075.51.

In the first month, interest is 320,000 × 0.005625 = $1,800.00, so only $275.51 reduces the balance. Over 30 years, the interest totals $427,185.01. The amortization calculator shows how that split changes every month.

Step 2: add taxes, insurance and PMI (PITI)

Most lenders collect property tax and homeowners insurance with the payment and hold them in escrow. Add:

Property tax: the annual bill ÷ 12. A $4,800 yearly tax is $400 a month.
Homeowners insurance: the annual premium ÷ 12. A $1,800 premium is $150 a month.
PMI: required on conventional loans with less than 20% down. It typically costs about 0.3%–1.5% of the loan a year, depending on your credit and down payment.
HOA dues, if any. They’re usually paid directly, but they count in affordability.

For the example, with no PMI because of the 20% down payment, the monthly payment is 2,075.51 + 400 + 150 = $2,625.51. With only 10% down, PMI at 0.6% of the loan would add about $160 a month on a $320,000 balance, for a total of $2,785.51.

The mortgage calculator adds tax and insurance for you.

How to calculate a mortgage payment in Excel

=PMT(rate/12, years*12, -loan)
=PMT(6.75%/12, 360, -320000)     → 2,075.51

Add the escrow items in separate cells: =2075.51 + 4800/12 + 1800/12. To see the balance after a number of years, use =FV(rate/12, months, payment, -loan), which shows what is still owed after that many payments.

15-year vs. 30-year mortgage

Term and rate	Monthly P&I	Total interest
30 years at 6.75%	$2,075.51	$427,185.01
15 years at 6.25%	$2,743.75	$173,875.57

The 15-year loan costs about $668 more a month but saves over $250,000 in interest, helped by the lower rate lenders usually offer on shorter terms.

How the rate changes the payment

On the same $320,000 loan over 30 years:

Rate	Monthly P&I
6.0%	$1,918.56
6.5%	$2,022.62
6.75%	$2,075.51
7.0%	$2,128.97
7.5%	$2,237.49

Each half point adds roughly $105–$110 a month, and well over $35,000 over 30 years. That is why shopping several lenders for the rate pays off.

How your balance falls over time

The payment stays the same, but the split between interest and principal shifts. On the 6.75% example, the balance is about $300,402 after 5 years, $272,963 after 10 years and $234,545 after 15 years. You have repaid less than a third of the loan by the halfway point. This matters if you plan to sell or refinance in the first few years, because your equity will come mostly from your down payment and any rise in the home’s value.

Biweekly payments

Paying half the monthly payment every two weeks adds up to 26 half-payments, the same as 13 monthly payments a year. On the example loan, that clears the mortgage in about 24 years and saves roughly $102,000 in interest, provided your lender applies each half-payment when it arrives. Many lenders offer this, sometimes for a fee. Making one extra monthly payment a year yourself has almost the same effect for free.

Payments on an adjustable-rate mortgage

With an adjustable-rate mortgage (ARM), the formula is the same, but it is recalculated each time the rate resets. A 5-year ARM starts with a fixed rate. After five years, the lender recalculates the payment on the remaining balance, over the remaining term, at the new rate. If the example loan were a 5-year ARM at 6.75% and the rate reset to 7.75%, the payment would jump from $2,075.51 to about $2,269.02 on the $300,402 balance with 25 years left. Rate caps limit how far each reset can go, so read them in your loan terms and plan for the highest payment the caps allow.

How much payment can you afford?

Lenders typically want your total debt payments, including PITI, at or below about 43% of gross income. To see the largest loan your income supports, use the loan affordability calculator. When comparing offers, look at the APR as well as the rate, because points and fees raise the true cost. The APR calculator shows how much.

Ways to lower your payment

Make a larger down payment. You borrow less, and at 20% you avoid PMI.
Shop for the rate. A quarter-point lower rate on $320,000 saves about $53 a month.
Consider points if you’ll keep the loan long enough to break even.
Appeal your property tax assessment if it looks high.
Shop your homeowners insurance every year or two.

Common mistakes

Forgetting escrow. The principal-and-interest figure isn’t your full payment.
Using the annual rate in the formula. Divide by 12 for a monthly payment.
Ignoring PMI with less than 20% down.
Comparing payments with different terms without looking at total interest.
Assuming the payment never changes. Taxes and insurance often rise, and adjustable-rate loans reset. Expect an escrow review every year, which can raise or lower the monthly amount.
Forgetting closing costs. They are paid upfront, not in the payment, but they can add 2–5% of the loan to what you need at closing.
Rounding the rate. A difference of 0.125% looks tiny, but on a large 30-year loan it adds up to thousands, so use the exact quoted rate.

Frequently asked questions

What is the formula for a monthly mortgage payment?

M = P × r ÷ (1 − (1 + r)^−n), where P is the loan amount, r the monthly rate (annual rate ÷ 12) and n the number of payments. A $320,000 loan at 6.75% for 30 years is $2,075.51 a month in principal and interest.

What does PITI mean?

Principal, interest, taxes and insurance, the four parts of a typical mortgage payment. Lenders often collect property tax and homeowners insurance monthly into an escrow account and pay the bills for you. PMI and HOA dues may be added too.

How do I calculate a mortgage payment in Excel?

Use =PMT(rate/12, years*12, -loan). For $320,000 at 6.75% for 30 years, =PMT(6.75%/12,360,-320000) returns 2,075.51.

Is a 15-year mortgage worth it?

It costs more each month but far less overall. $320,000 at 6.25% over 15 years is $2,743.75 a month with $173,876 of interest, compared with $2,075.51 and $427,185 at 6.75% over 30 years. Choose it if the higher payment fits your budget comfortably.

When does PMI go away?

On conventional loans, you can usually ask to remove PMI when the balance reaches 80% of the home's original value, and it ends automatically at 78%. FHA mortgage insurance follows different rules.