Guides mortgage mortgage payment finance home buying

How to Calculate Your Monthly Mortgage Payment (With Formula and Examples)

By ClickSolveTools Editorial TeamUpdated 11 min read

Your monthly mortgage payment for principal and interest is M = P × r(1 + r)^n / ((1 + r)^n - 1), where P is the loan amount, r is the monthly interest rate (the annual rate divided by 12), and n is the number of monthly payments. For a $300,000 loan at 7% for 30 years, r = 0.07 / 12 and n = 360, which gives $1,995.91 a month.

That number covers only principal and interest. Property taxes, homeowners insurance, and mortgage insurance on small down payments come on top, and the sections below show how to estimate each one. For context, Freddie Mac's weekly survey put the average 30-year fixed rate at 7.03% on September 24, 2026, up from 6.30% a year earlier, so the examples here use rates from 5% to 8%. You can check any result with our Mortgage Calculator.

The Mortgage Payment Formula

Every fixed-rate mortgage payment is calculated with this formula:

M = P × [r(1 + r)^n] / [(1 + r)^n - 1]

Where:

The detail most people miss: r is the monthly rate, not the annual rate. A 6% annual rate means r = 0.06 / 12 = 0.005 per month. Use the annual rate by mistake and every number downstream is wrong.

The worked examples below round the intermediate steps for readability, so redoing them by hand may differ by a few cents. The final payments use full precision.

Example 1: $250,000 at 6% for 30 Years

Suppose you buy a $312,500 home, put 20% down ($62,500), and borrow $250,000 at a 6% fixed rate for 30 years.

Plugging those into the formula:

M = 250,000 × [0.005 × (1.005)^360] / [(1.005)^360 - 1] (1.005)^360 = 6.022575 M = 250,000 × [0.005 × 6.022575] / [6.022575 - 1] M = 250,000 × 0.030113 / 5.022575 M = 250,000 × 0.0059955 M = $1,498.88

Your principal and interest payment is $1,498.88 per month. Over 30 years you pay $539,595 in total, so $289,595 goes to interest. That is more than the original loan amount.

Example 2: $400,000 at 7% for 30 Years

A larger loan at a rate close to the September 2026 market average:

M = 400,000 × [0.0058333 × (1.0058333)^360] / [(1.0058333)^360 - 1] (1.0058333)^360 = 8.116497 M = 400,000 × [0.0058333 × 8.116497] / [8.116497 - 1] M = 400,000 × 0.047346 / 7.116497 M = 400,000 × 0.0066530 M = $2,661.21

At $2,661.21 per month, you pay $958,036 over the life of the loan, and $558,036 of that is interest. The same $400,000 at 6% would cost $2,398.20 a month, so the extra point of rate adds about $263 a month and about $94,700 in total interest.

Example 3: $350,000 at 6.5% for 15 Years

A shorter term means a higher payment but far less interest:

M = 350,000 × [0.0054167 × (1.0054167)^180] / [(1.0054167)^180 - 1] (1.0054167)^180 = 2.644201 M = 350,000 × [0.0054167 × 2.644201] / [2.644201 - 1] M = 350,000 × 0.014323 / 1.644201 M = 350,000 × 0.0087111 M = $3,048.88

The payment is $3,048.88 per month, and you pay $548,798 in total, of which $198,798 is interest. Stretch the same $350,000 over 30 years at the same 6.5% and the payment falls to $2,212.24, but total interest climbs to $446,406, more than double. Lenders usually charge less for 15-year loans (Freddie Mac's average was 6.42% for 15-year loans versus 7.03% for 30-year loans on September 24, 2026), so the interest gap is usually even wider than this same-rate comparison.

Monthly Payment Table for a $300,000 Loan

This table shows the principal and interest payment on a $300,000 loan at rates from 5% to 8%. Interest totals assume every payment is made on schedule for the full 30 years.

Interest Rate 15-Year Monthly 30-Year Monthly 30-Year Total Interest
5.0% $2,372 $1,610 $279,767
5.5% $2,451 $1,703 $313,212
6.0% $2,532 $1,799 $347,515
6.5% $2,613 $1,896 $382,633
7.0% $2,696 $1,996 $418,527
7.5% $2,781 $2,098 $455,152
8.0% $2,867 $2,201 $492,466

Going from 5% to 8% adds $591 to the 30-year monthly payment and raises total interest by 76%, from $279,767 to $492,466. Around today's rates each extra full percentage point adds roughly $197 to $205 a month on this loan, which is why even a quarter-point difference between lenders is worth asking about.

Understanding Amortization: Where Your Money Goes

In the early years of a 30-year mortgage, most of each payment goes to interest. On a $300,000 loan at 7%, your first payment of $1,995.91 splits into $1,750.00 of interest and only $245.91 of principal. At payment 60 (five years in) it is $1,649.32 of interest and $346.59 of principal. At payment 180, halfway through, it is $1,299.39 of interest and $696.52 of principal. Principal does not overtake interest until payment 242, a little past the 20-year mark.

After five years of payments totaling about $119,750, you have paid down only $17,605 of principal, and the balance is $282,395. That is why selling after a few years can feel disappointing, and why extra payments early in the loan have the biggest effect: each extra dollar of principal you remove early stops accruing interest for decades. Our Amortization Schedule shows the interest and principal split for every payment of your own loan.

What the Formula Leaves Out: Taxes, Insurance, and More

The formula gives you principal and interest (P&I). Lenders look at the full monthly housing cost, often called PITI:

Here is what that looks like in practice. On a $375,000 home with 20% down you borrow $300,000. At 7%, principal and interest is $1,995.91. Add property tax at 1% of the home price ($312.50 a month) and insurance at $200 a month, and the payment is $2,508.41 before any HOA dues. Our Mortgage Calculator has fields for taxes, insurance, PMI, and HOA dues so you can see your own total. If you are still deciding whether buying beats renting, our rent vs buy guide walks through the comparison.

PMI: The Cost of a Small Down Payment

If you take out a conventional loan with less than 20% down, you usually pay private mortgage insurance. PMI protects the lender, not you, if you stop making payments, and the most common way to pay for it is a monthly premium added to your mortgage payment, according to the CFPB. Freddie Mac estimates PMI at roughly $30 to $70 a month for every $100,000 borrowed, which works out to about 0.36% to 0.84% of the loan per year. Your actual quote depends on your down payment and credit score and can fall outside that range.

Freddie Mac estimate (per $100,000) Annual rate Monthly cost on a $300,000 loan Yearly cost on a $300,000 loan
$30 a month 0.36% $90 $1,080
$50 a month 0.60% $150 $1,800
$70 a month 0.84% $210 $2,520

PMI does not last forever on a conventional loan. Under the federal Homeowners Protection Act, as the CFPB explains in its PMI cancellation guide, you can ask your servicer in writing to cancel PMI once your balance is scheduled to reach 80% of the home's original value, or sooner if extra payments get you there. You need a good payment history and no second mortgage, and the property value cannot have fallen below its original value. The servicer must end PMI automatically when the balance is scheduled to reach 78% of the original value, and no later than the month after the midpoint of the loan term (year 15 of a 30-year loan). FHA loans use their own mortgage insurance with different rules. To see how your down payment changes the loan and PMI, try our Down Payment Calculator.

The Power of Extra Payments

Extra payments toward principal shorten the loan and cut interest. Here is the effect on Example 1 ($250,000 at 6% for 30 years, $1,498.88 a month):

Extra Monthly Payment Payoff Time Interest Saved
$0 (minimum only) 30 years $0
+$100 25 years, 6 months $51,572
+$250 21 years $99,751
+$500 16 years, 5 months $146,128

An extra $250 a month saves about $99,750 in interest and pays the loan off 9 years early. Tell your servicer the extra money is for principal, and check your loan documents for any prepayment penalty. Use our Loan Payoff Calculator to model your own extra payment.

Fixed-Rate vs. Adjustable-Rate Mortgages (ARM)

Everything above assumes a fixed-rate mortgage, where the rate stays the same for the whole loan. An adjustable-rate mortgage (ARM) keeps a fixed rate for an initial period, then resets on a schedule to an index plus a margin, as the CFPB explains in its guides to the index and margin and to rate caps. A 5/1 ARM resets once a year after year 5, and newer conforming ARMs are often written as 5/6, 7/6, or 10/6, which reset every six months (Freddie Mac).

Caps limit how far the rate can move: one for the first adjustment, one for each later adjustment, and one for the life of the loan. The CFPB lists typical first-adjustment caps of 2 or 5 points, later caps of 1 or 2 points, and lifetime caps most commonly around 5 points above the starting rate.

Here is what that can mean. Take a $300,000 ARM at 6% with 2/1/5 caps. The payment starts at $1,798.65, and after five years the balance is $279,163. If the rate steps up 2 points to 8% at the first reset, the payment on that balance becomes $2,154.63, which is $355.97 more. If the rate kept rising a point a year to the 11% lifetime cap, the fastest these caps allow, it would reach 11% at the start of year 9 and the payment would be about $2,708.

When an ARM might make sense

Tips for Getting a Lower Monthly Payment

  1. Shop at least three lenders. The CFPB advises comparing at least three loan offers, and preapprovals gathered within a short window should not have a major effect on your credit score. On a $300,000 loan near 7%, a half-point difference is worth about $100 a month.
  2. Check your credit before you apply. Lenders price loans by credit score, and PMI costs depend on it too, so fixing errors on your reports before you apply can pay off.
  3. Weigh discount points carefully. One point costs 1% of the loan, and how much it lowers your rate varies by lender, loan type, and market (CFPB). Say a $3,000 point on a $300,000 loan cuts the rate from 6.5% to 6.25%. The payment falls from $1,896.20 to $1,847.15, saving $49.05 a month, so you break even after about 61 months. If you might sell or refinance sooner, skip the points.
  4. Put more down. A 20% down payment avoids PMI on a conventional loan, and any larger down payment shrinks the loan and the payment.
  5. Pick the term that fits your cash flow. On $350,000 at 6.5%, a 30-year term costs $2,212.24 a month against $3,048.88 for 15 years. You can take the 30-year payment and still make extra payments when you can.

More money tools are in our finance calculators collection.

Frequently Asked Questions

How much house can I afford on a $75,000 salary?

A common rule of thumb caps your housing payment (PITI) at 28% of gross monthly income. On $75,000 that is $6,250 a month gross, or $1,750 for housing. Assume 10% down, 1% property tax, $200 a month for insurance, and PMI at 0.6% of the loan a year. Then $1,750 supports a home price of about $213,000 at 7% or about $232,000 at 6%. With 20% down at 7% (no PMI) it is about $252,000. Lenders also weigh your other debts, so check your ratio with our Debt-to-Income Calculator.

Is a 15-year or 30-year mortgage better?

A 15-year mortgage has a higher payment but saves a large amount of interest. On $350,000 at 6.5%, the 15-year payment is $3,048.88 with $198,798 of interest, against $2,212.24 with $446,406 of interest over 30 years. If you can afford the 15-year payment while still saving for retirement and emergencies, it is usually the cheaper choice. If it would strain your budget, take the 30-year loan and add extra payments when you can.

Does making biweekly payments actually save money?

Yes, if the extra money goes to principal. Paying half your payment every two weeks makes 26 half payments a year, which equals 13 full payments instead of 12. On a 30-year loan at 6%, that pays the loan off in about 24.6 years, and at 7% in about 23.8 years, so it saves roughly 5 to 6 years. Confirm that your servicer applies each half payment when it arrives, because some hold it until the second half comes in, and ask whether it charges a fee. Adding one-twelfth of your payment to each monthly payment gets a similar result.

What credit score do I need for a mortgage?

It depends on the loan. FHA loans allow a minimum decision score of 580 with 3.5% down, or 500 to 579 with at least 10% down, under HUD guidelines. For conventional loans, Fannie Mae's Desktop Underwriter stopped requiring a minimum credit score of 620 in November 2025, but lenders and mortgage insurers can still set their own minimums. A higher score gets you a lower rate and lower PMI, and each full percentage point of rate is worth about $200 a month on a $300,000 loan near 7%.

Should I pay off my mortgage early or invest the extra money?

It depends on your rate, your other goals, and your comfort with risk. Every extra dollar toward a 7% mortgage saves 7% interest, a guaranteed return. Stock returns vary and can be negative in any given year, so investing has the stronger case when your mortgage rate is low, such as 3%. Most people also build an emergency fund first (see our emergency fund guide) and take any employer retirement match. To compare scenarios, use our Compound Interest Calculator.

Sources