How the mortgage calculator works
Your monthly mortgage payment has two core parts — principal (the loan balance you pay down) and interest (the cost of borrowing) — shown together as “P&I”. Lenders usually also collect property tax and homeowners insurance monthly, making up your PITI payment. This calculator adds optional tax, insurance and HOA on top of P&I so you see the true monthly cost of owning the home, not just the loan.
The formula
Monthly principal & interest uses the standard amortization formula: M = P · r · (1+r)ⁿ / ((1+r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12).
Worked example: a $400,000 home
Say you buy a $400,000 home with $80,000 down (20%) on a 30-year loan at 6.5%. Your loan amount is $320,000 and the principal & interest payment works out to $2,023 a month. Add typical escrow costs — $400/month property tax and $150/month insurance — and the real monthly bill is about $2,573. Over 30 years you’d pay roughly $408,000 in interest on top of the amount borrowed — which is why the rate and the term matter so much.
15-year vs 30-year: what the term really costs
| Term | Monthly P&I | Total interest |
|---|---|---|
| 30 years | $2,023 | $408,142 |
| 15 years | $2,788 | $181,758 |
On the same $320,000 loan at 6.5%, the 15-year term costs $765 more per month but saves about $226,000 in interest. If the higher payment fits comfortably, a shorter term is one of the most powerful money moves available. If it would stretch you thin, take the 30-year and make extra payments when you can — flexibility without the obligation.
How much house can you afford?
A common guideline is the 28/36 rule: housing costs under 28% of gross monthly income, and all debt payments combined under 36%. On a $9,000/month income that caps housing near $2,520/month. Work it backwards with our home affordability calculator, and if you’re weighing buying against renting, the rent vs. buy calculator compares the two over time.
Down payment and PMI
Put down less than 20% and most conventional lenders add private mortgage insurance (PMI) — typically 0.3–1.5% of the loan per year — until you reach about 20% equity. A bigger down payment shrinks the loan, may remove PMI entirely, and often earns a slightly better rate. That said, don’t drain your emergency fund to hit 20%; PMI eventually drops off, but an empty savings account is a risk every single month.
Extra payments: small amounts, big effect
Adding $200/month to the example loan pays it off in about 23.5 years instead of 30 and cuts total interest to roughly $303,000 — a saving of over $105,000. Extra payments go entirely toward principal, so every future interest charge is calculated on a smaller balance. If rates have fallen since you bought, also check the refinance calculator.
Ways to lower your monthly payment
The levers, in rough order of impact: borrow less (bigger down payment or a cheaper home), get a lower rate (shop at least three lenders — quotes vary more than people expect, and your credit score drives the offer), stretch the term (lowers the payment but raises lifetime interest), buy discount points if you’ll keep the loan long enough to break even, and appeal an inflated property-tax assessment.
Frequently asked questions
What's the monthly payment on a $300,000 mortgage?
At 6.5% over 30 years, principal and interest on a $300,000 loan is about $1,896 a month. Property tax, insurance and any PMI or HOA come on top — enter your figures above to see the full payment.
What is PITI?
Principal, Interest, Taxes and Insurance — the four parts of a typical monthly mortgage payment. Lenders collect tax and insurance into an escrow account and pay those bills for you.
Do I need a 20% down payment?
No. Many buyers put down far less — conventional loans allow 3–5% and FHA 3.5%. Below 20% you'll usually pay PMI until you reach about 20% equity, which is worth factoring into the monthly cost.
Is a 15-year or 30-year mortgage better?
A 15-year saves enormous interest (about $226,000 on a $320,000 loan at 6.5%) but the payment is much higher. A 30-year keeps payments manageable and you can still pay it off early with extra payments. Choose the shortest term you can afford comfortably.
How much income do I need for this payment?
By the 28% guideline, gross monthly income should be at least 3.6× the full housing payment. A $2,573/month payment suggests an income around $9,200/month (roughly $110,000/year).
Do extra payments really help?
Yes — extra payments go straight to principal. An extra $200/month on a $320,000, 6.5% loan pays it off 6.5 years early and saves over $100,000 in interest.
Why is my lender's quote different from this calculator?
Lenders include your exact rate, PMI, escrow amounts, and closing costs or fees. This tool gives a close estimate of the recurring monthly payment; the Loan Estimate document from a lender is the binding figure.
Is my data stored anywhere?
No. All calculations run in your browser — the numbers you enter are never sent to a server or stored.