How to Calculate a Mortgage Payment (Step by Step)

Q: How do I figure out my mortgage payment without a calculator?

Use M = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1) with P = loan amount, r = annual rate ÷ 12, n = months. Then add monthly taxes, insurance, PMI and HOA. Or use the $6.32-per-$1,000 shortcut at 6.5%/30yr for a fast estimate.

Q: What does PITI mean?

Principal, Interest, Taxes, Insurance — the complete monthly payment most lenders collect, with taxes and insurance held in an escrow account and paid on your behalf when due.

Q: Why is my first payment mostly interest?

Monthly interest equals balance × monthly rate. The balance is at its maximum on day one, so interest dominates early payments and principal dominates late ones — see the amortization calculator for the full picture.

Q: How do I compute a payment for a 15-year loan?

Same formula with n = 180 and your 15-year rate. Example: $340,000 at 6.0% for 15 years → about $2,869 a month, with total interest near $176,486 versus $466,471 for a 30-year at 6.9%.

You do not need a finance degree to figure out a mortgage payment — just one formula and four add-ons. Here is the complete calculation, worked end to end with real numbers.

Step 1: The core formula (principal & interest)

M = P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1)

M — monthly principal & interest payment
P — principal: home price minus down payment
r — monthly rate: annual rate ÷ 12 (as a decimal)
n — number of payments: years × 12

Step 2: Work the example

Home price $425,000, 20% down → loan P = $340,000. Rate 6.5% → r = 0.065 ÷ 12 = 0.005417. Term 30 years → n = 360.

(1 + r)ⁿ = (1.005417)³⁶⁰ ≈ 6.993
Numerator: 340,000 × 0.005417 × 6.993 ≈ 12,879
Denominator: 6.993 − 1 = 5.993
M ≈ 12,879 ÷ 5.993 ≈ $2,149 per month

That is the exact figure our mortgage payment calculator returns — use it to skip the arithmetic for your own scenario.

Step 3: Add taxes, insurance and the rest (PITI+)

Property taxes: annual bill ÷ 12. $4,200/yr → $350/mo.
Homeowners insurance: annual premium ÷ 12. $1,800/yr → $150/mo.
PMI: if down payment < 20%, roughly 0.3–0.9% of the loan per year ÷ 12 — estimate it with the PMI calculator.
HOA dues: the monthly amount, if any.

Full example total: $2,149 + $350 + $150 = $2,649 a month. This is the figure lenders use in affordability ratios and the one your escrow account collects.

Step 4: Sanity shortcuts

The $6.32 rule: at 6.5% over 30 years, every $1,000 borrowed costs about $6.32 a month. At 7.5% it is $6.99; at 5.5%, $5.68. Scale to any loan size instantly.
Rate sensitivity: each 0.25% of rate on a $340,000 loan ≈ $55 a month.
Term shock: the same loan over 15 years: payment jumps to roughly $2,962 — but lifetime interest falls from $433,689 to about $193,000.

Common mistakes when figuring a payment

Forgetting taxes and insurance (underestimates by 20–30%); using the home price instead of the loan amount; ignoring PMI; and using an advertised teaser rate instead of a personal quote. Avoid all four by pricing complete scenarios in the PITI calculator and checking income fit with the affordability calculator.

Frequently asked questions

How do I figure out my mortgage payment without a calculator?