How to Calculate Your Mortgage Payment (Formula + Examples)
Learn the mortgage payment formula, what PITI means, and how to estimate your monthly housing cost before you shop.
Your monthly principal and interest come from the standard amortization formula — but budget for PITI, which adds property taxes, insurance, and PMI to that number.
What you'll walk away with
Skim these first — then dig into the details below.
- 1Monthly payment = principal + interest (P&I); budget for PITI (taxes + insurance too).
- 2A $350,000 loan at 7% for 30 years = roughly $2,329/month principal and interest.
- 3Every 1% rate increase adds roughly $200/month on a $350,000 loan.
- 420% down avoids PMI and lowers your monthly payment significantly.
Reading helps. Calculating makes it real. Free tools — instant results, no signup.
Knowing how the payment is built keeps you from being surprised at closing — and lets you spot when a quote does not add up.
The mortgage calculator does the arithmetic instantly. The formula below explains what it is doing.
The formula, in plain terms
Monthly P&I = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where P is the loan amount, r is the monthly interest rate (annual ÷ 12), and n is the total number of payments (years × 12).
For a $350,000 loan at 7% over 30 years: r = 0.005833, n = 360, and the payment works out to about $2,329 a month.
- P = purchase price minus down payment.
- r = annual rate ÷ 12, as a decimal.
- n = 360 for a 30-year loan, 180 for a 15-year.
- The result is principal and interest only — nothing else.
What PITI adds on top
PITI is principal, interest, taxes, and insurance — the number your lender uses to qualify you and the one you should budget around.
- Property taxes: roughly 1–2% of value per year, billed through escrow monthly.
- Homeowners insurance: often $1,000–$3,000 per year.
- PMI: about 0.3–1.5% of the loan annually when you put down less than 20%.
- HOA dues: not in PITI, but very much in your budget.
What moves the payment most
Rate and term dominate. Down payment matters mostly through loan size and PMI.
- Rate: $350,000 costs about $2,098 at 6% versus $2,329 at 7% — roughly $83,000 more interest over 30 years.
- Term: the same loan at 7% over 15 years runs about $3,145 a month but saves over $200,000 in interest.
- Down payment: 20% removes PMI and shrinks the balance you finance.
- Extra principal: one additional payment a year cuts a 30-year loan by roughly four to six years.
Work backward from payment to price
Once you know your comfortable monthly number, the formula runs in reverse to give you a shopping range.
- 1
Cap total housing cost near 28% of gross monthly income.
- 2
Subtract estimated taxes, insurance, and any HOA to isolate your P&I budget.
- 3
Convert that P&I into a loan amount using today’s rate.
- 4
Add your down payment to get your target purchase price.
- 5
Sanity-check the range against how much house can I afford.
Disclaimer: This page includes AI-assisted educational content reviewed for general accuracy. It is not personalized financial, tax, or legal advice. Verify numbers with a qualified professional and our editorial standards.
Continue reading
Related guides that deepen the same decision.
How Much House Can I Afford? Rules, Ratios & Calculator
Keep total housing costs under about 28% of gross monthly income and all debt payments under 36%, then buy below your pre-approval ceiling so repairs and rate changes do not break your budget.
ReadReal EstateHow to Compare Mortgage Loans: Beyond the Interest Rate
Collect Loan Estimates from at least three lenders on the same day, then compare APR and total cost over how long you will actually keep the loan — not the advertised rate.
ReadReal EstateRent vs Buy: When Does Homeownership Actually Make Sense?
Buying usually wins if you will stay put at least five to seven years and can cover the payment plus maintenance; renting wins for shorter timelines because transaction costs eat any early gains.
ReadReady to plug in your numbers?
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