How to calculate a monthly mortgage payment: formula and a $400,000 example
A fixed-rate mortgage is paid back in equal monthly instalments. The payment comes from one formula, and once you see it you can check any lender’s quote.
The formula
M = P × r × (1 + r)n ÷ ((1 + r)n − 1)
- M is the monthly payment.
- P is the amount borrowed (price minus down payment).
- r is the monthly rate (annual rate ÷ 12).
- n is the number of monthly payments (years × 12).
Example: $400,000 home, 20% down
You borrow $320,000. At 6.5% for 30 years, r = 0.065 ÷ 12 and n = 360, so the payment is $2,022.62 a month. Over 30 years you pay $728,142 in total, which means $408,142 is interest.
Skip the maths, try your own numbersMortgage & Loan CalculatorFree, instant, no sign-up →How rate and term change the result
| Rate | Term | Monthly payment | Total interest |
|---|---|---|---|
| 5.5% | 30 years | $1,816.92 | $334,093 |
| 6.5% | 30 years | $2,022.62 | $408,142 |
| 7.5% | 30 years | $2,237.49 | $485,495 |
| 6.5% | 15 years | $2,787.54 | $181,758 |
One extra point of rate adds roughly $215 a month here. Moving from 30 to 15 years raises the payment by about $765 a month but cuts the interest by more than half.
What the formula leaves out
This is principal and interest only. Property tax, home insurance, mortgage insurance (if your down payment is under 20%) and HOA fees are extra, so your real monthly cost will be higher.
Try your own price, down payment, rate and term in the calculator below.
How the payment splits between interest and principal
The monthly payment is the same every month, but its mix changes. In month one on the $320,000 loan, interest is $320,000 × 0.065 ÷ 12 = $1,733.33, so only $289.29 of the $2,022.62 payment reduces the balance. As the balance falls, the interest part shrinks and the principal part grows. This is called amortization.
| After | Remaining balance |
|---|---|
| 5 years | $299,555 |
| 10 years | $271,284 |
| 15 years | $232,189 |
Halfway through a 30-year loan you have repaid less than a quarter of the principal. This is why early extra payments are powerful.
What an extra $200 a month does
Adding $200 a month to the $2,022.62 payment pays the loan off in about 23.4 years instead of 30, and total interest falls from $408,142 to about $302,714, a saving of roughly $105,000. Confirm with your lender that extra payments go to principal and that there is no prepayment penalty.
Down payment: what 20% really buys you
| Down payment | Loan | P&I at 6.5%, 30 years |
|---|---|---|
| 5% | $380,000 | $2,401.86 |
| 10% | $360,000 | $2,275.44 |
| 20% | $320,000 | $2,022.62 |
With less than 20% down on a conventional loan, lenders usually charge private mortgage insurance (PMI) until your equity reaches a threshold. That is not included in the figures above.
The real monthly cost: PITI and more
Lenders talk about PITI: principal, interest, property taxes and homeowners insurance. Taxes and insurance are often collected monthly in an escrow account. Add PMI if applicable, HOA dues and maintenance. A common rule of thumb is to budget 1% of the home value per year for repairs, though older homes may need more.
Interest rate vs APR
The interest rate sets your payment. The APR includes lender fees and points and is a better way to compare offers, because a low rate with high fees can cost more. Ask for a Loan Estimate from each lender and compare the same loan type side by side.
Fixed-rate vs adjustable-rate mortgages
A fixed-rate loan keeps the rate for the whole term. An adjustable-rate mortgage (ARM) starts with a fixed period, often 5, 7 or 10 years, then resets according to an index plus a margin, subject to caps. ARMs can have a lower starting payment, but you carry the risk that payments rise after the reset.
How much house can you afford?
Lenders look at your debt-to-income ratio, credit score, down payment and reserves. A simple check is to keep total housing cost at or below roughly 28% of gross monthly income and total debt at or below about 36%. These are guidelines and loan programmes differ. Use the calculator to find the price and payment that fit your budget.
Troubleshooting: common problems and fixes
- The bank quote is higher than the calculator. Add property tax, insurance, mortgage insurance and any fees rolled into the loan. Also check the rate and term used.
- The payment changed after a year. Escrow amounts for taxes and insurance can be adjusted, and adjustable-rate loans reset on a schedule.
- I get a different result with an online table. Some calculators use different compounding or round the rate. Check that all use a monthly rate of annual rate divided by 12.
- I cannot afford the payment. Test a longer term, a larger down payment or a lower price, and keep reserves for repairs.
- The lender mentions points. One point costs 1% of the loan and may lower the rate. Compare the break-even time before you pay for points.
How accurate is this?
The formula is the standard fixed-rate amortisation formula, so principal and interest match what a lender calculates for the same inputs. Taxes, insurance, mortgage insurance and fees are not included. Always rely on your lender’s official Loan Estimate for a real offer. The calculator works in your browser and stores nothing.
More free Zyphub tools you may need
- Mortgage & Loan Calculator: Monthly payment and total interest.
- Income Tax & Take-Home Pay Calculator: Take-home pay after income tax in the US, UK, Canada, Australia, India, New Zealand and Singapore.
- Compound Interest Calculator: See how savings grow over time.
Frequently asked questions
How do you calculate a monthly mortgage payment?
Use M = P × r × (1+r)^n ÷ ((1+r)^n − 1), where P is the loan, r the monthly rate and n the number of payments. For $320,000 at 6.5% over 30 years the result is $2,022.62.
How much interest will I pay on a $320,000 mortgage?
At 6.5% for 30 years, total interest is about $408,142, which is more than the amount borrowed.
Does the monthly payment include taxes and insurance?
Not in the formula. Property tax, homeowners insurance, mortgage insurance and HOA fees are added on top, often through an escrow account.
Is a 15-year mortgage better than a 30-year mortgage?
A 15-year loan has a higher monthly payment but far less total interest. A 30-year loan has a lower payment and more flexibility. The right choice depends on your budget and goals.
Do extra payments really save money?
Yes. An extra $200 a month on this loan saves about $105,000 in interest and shortens the term by roughly six and a half years, if the extra goes to principal.
How much deposit do I need for a house?
Many loan programmes allow 3% to 5% down, but 20% avoids mortgage insurance on conventional loans.
Is it worth overpaying a mortgage?
Overpaying saves interest, but compare it with other uses of your money, such as high-interest debt or an emergency fund.