Mortgage Calculator: Estimate Your Monthly Payment

Mortgage Calculator

Mortgage Amount

Annual Interest Rate

Loan Term (Years)

Calculator Results

Monthly Payment
Total Interest Paid
Total Cost of Loan

A home loan balance with an average interest rate of paid over a year term will have a monthly payment of . In total, the loan will cost with in interest.

How are mortgages calculated?

Calculating a mortgage payment involves more than just dividing the loan amount by the number of months. 

The main formula crunches together an estimate based on your loan amount, interest rate, and loan term, plus other factors you may not consider like property taxes, private mortgage insurance (PMI), and homeowners insurance. 

Saving up for a larger down payment can help lower your monthly payments (because you’ll need to borrow less money) and potentially avoid PMI. Also, having a good credit score can help you qualify for the lowest rates available right now. 

Our calculator accounts for all these elements, so you get a realistic estimate of your monthly mortgage costs.

How is the monthly payment for a mortgage calculated?

Your monthly mortgage payment is primarily based on three factors: the loan amount, interest rate, and loan term. The basic formula looks like this:

M = P[r(1+r)^n] / [(1+r)^n – 1]

Where:

M = Monthly payment

P = Principal (loan amount)

r = Monthly interest rate (annual rate divided by 12)

n = Total number of payments (years × 12)

For example, say you’re considering a $400,000 home loan at 6% interest for 30 years:

P = $400,000

r = 0.06 / 12 = 0.005

n = 30 × 12 = 360

Plugging these into our formula:

M = $400,000[0.005(1+0.005)^360] / [(1+0.005)^360 – 1]

M = $2,398.20

This $2,398.20 includes both your principal (the amount originally borrowed) and interest (the cost of borrowing money). But when you buy a home, there are also other costs to consider: 

• Property taxes
• Homeowners insurance
• Private mortgage insurance (if your down payment is less than 20%)
• HOA fees

These additional costs may or may not be rolled into your mortgage payment. But regardless, they will increase the total cost of homeownership. 

As you pay off your mortgage, your payment breakdown changes — you’ll pay more towards principal and less towards interest. But unless you have an adjustable-rate mortgage, your total monthly payment typically stays the same.

How is the interest rate for a mortgage calculated?

Lenders set mortgage interest rates based on various factors:

• Credit score—Higher scores are rewarded with lower rates
• Down payment—Larger down payments may also qualify you for better rates
• Loan term—Generally, shorter loan terms have lower rates
• Market conditions—Things like inflation, the federal funds rate, and other economic factors can impact your rate

Whatever interest rate you end up with will heavily influence your monthly payment. For example, say you found your dream home and need a $400,000, 30-year loan:

• At 6% interest, you’d pay $2,398 monthly 
• At 7% interest, you’d pay $2,661 monthly

This seemingly small 1% difference results in you paying $263 more per month, or $94,683 total over the life of your loan.

How is the loan term for a mortgage calculated?

When you take out a mortgage, you get to choose your loan term. Common options are 15, 20, and 30 years, with 30 being the most popular. Your choice will affect your monthly payment and the amount of interest you pay. 

For example, say you’re torn between a 15-year and 30-year term on a $400,000 loan at 6% interest:

30-year term:

M = $400,000[0.005(1+0.005)^360] / [(1+0.005)^360 – 1]

M = $2,398.20 monthly

Total interest paid: $463,352.76

15-year term:

M = $400,000[0.005(1+0.005)^180] / [(1+0.005)^180 – 1]

M = $3,375.43 monthly 

Total interest paid: $207,576.92

The 15-year term has higher monthly payments but saves you $255,776 in interest. Not to mention, you’ll be mortgage-free in half the time.

This doesn’t necessarily mean that a 15-year loan is always the right choice. Your decision depends on your financial goals and budget. Generally: 

• Longer loan terms have lower monthly payments but the trade-off is that you pay more interest overall. 
• Shorter loan terms help you build equity faster and generally have lower interest rates because your lender will get its money back quicker. But the trade-off is higher monthly payments.

How is the amortization for a mortgage calculated?

Amortization is the process of paying off your mortgage over time. Each payment is split between principal and interest. However, the ratio of principal and interest changes over time as you pay down your mortgage balance, even if your monthly payment stays the same.

At first, most of your payment goes towards interest. As time passes, more goes towards the principal. This shift happens because interest is calculated on the remaining balance, which decreases with each payment.

Your loan amount, interest rate, and term all affect amortization. Our calculator gives you a detailed amortization schedule to review based on these factors. 

How is the escrow calculated for my mortgage?

Around 80% of mortgages have escrow, which is an account your lender manages to pay property taxes and home insurance on your behalf. Escrow accounts are typically required if you put less than 20% down on a conventional mortgage or if you have an FHA loan. 

Here’s how to calculate escrow:

• Property taxes—estimated annual amount divided by 12
• Homeowners insurance—annual premium divided by 12
• PMI (if applicable)—your PMI percent multiplied by your loan amount, divided by 12

For example, if your annual property taxes are $4,000 and insurance is $2,000:

Monthly escrow = ($4,000 + $2,000) / 12 = $500

This $500 is added to your monthly mortgage payment. Your lender adjusts the escrow amount annually based on actual costs. This can change your monthly payment, even if you have a fixed interest rate.

What other fees are part of my mortgage calculation?

Your monthly mortgage payment isn’t the only expense you’ll face when buying a home. Other costs may include: 

• Closing costs. These can be around 3% to 5% of your loan amount. They include things like appraisal fees, title insurance, origination fees, and any points you purchased to lower your interest rate. You usually pay these fees at closing. They’re not part of your mortgage calculation. 
• HOA fees. These fees may apply if the property you purchase is part of a homeowner’s association (HOA). You often pay these fees separately from your mortgage.
• Maintenance projects. Experts recommend budgeting 1% to 2% of your home’s purchase price for maintenance each year. On a $400,000 home, this means setting aside $4,000 to $8,000 per year or $333 to $667 per month. 
• Utilities and other costs. On top of these expenses, you’ll have utilities to pay for as well as any miscellaneous expenses like new furniture, upgrades, and renovations.  

How to calculate the ideal mortgage

Your mortgage should fit your life, not the other way around. So as you determine your budget, make sure your monthly payment leaves room for savings, fun, and unexpected costs. A comfortable payment is more important than the perfect rate or shortest term. 

Consider these tips: 

• Stick to the 28/36 rule. Keep your mortgage payment under 28% of your monthly income, and all debts under 36%.
• Go for a 30-year fixed-rate mortgage. It gives you breathing room. You can always pay extra when you can, but you’re not stuck with high payments if money gets tight.
• Down payment. 20% is ideal to avoid PMI, but don’t empty your savings. Ask your lender about how much PMI would cost — sometimes it makes more financial sense to pay PMI and keep some cash for home repairs or investments.
• Market timing. If rates are super low, it might be smart to put less down and invest the rest. If rates are high, a bigger down payment could help.
• Interest rate. You have no control over what mortgage interest rates look like right now. That’s why some people say, “date the rate, but marry the mortgage.” Focus on getting into a home you love (and can afford) now. You can always refinance when rates drop.