How your mortgage payment is calculated
A fixed-rate mortgage is repaid in equal monthly payments. Each payment first covers the interest owed for that month, and the rest reduces the balance. Early on most of the payment is interest; by the final years most of it is principal. The payment that pays a loan off exactly over its term is:
M = P × r ÷ (1 − (1 + r)−n)
where P is the amount borrowed (price minus down payment), r is the yearly rate divided by 12, and n is the number of monthly payments. A $320,000 loan at 6.5% for 30 years has r = 0.065 ÷ 12 and n = 360, which gives $2,022.62 a month before taxes and insurance.
Of that first payment, $1,733.33 is interest: one month’s interest on the full $320,000. Only $289.29 goes to the balance. On this loan, principal doesn’t overtake interest until payment 233, in year 20. After five years you’d have paid about $100,900 in interest but only about $20,400 of principal, and would still owe $299,554.97.
What else goes into the monthly payment
Most lenders collect property tax and homeowners insurance with each payment and pay those bills for you from an escrow account, so the amount you actually send is higher than principal and interest alone. Tax and insurance bills can change from year to year, and your escrow payment changes with them, so treat those lines as estimates.
If you put down less than 20% on a conventional loan, the lender usually also charges private mortgage insurance (PMI), at a yearly rate your lender quotes based on your down payment and credit. The calculator charges the rate you enter on the original loan amount. Under the federal Homeowners Protection Act, PMI must stop automatically once the balance is scheduled to reach 78% of the home’s original value, or at the loan’s midpoint if that comes first. You can ask for it to be removed at 80%, in writing and with a good payment history; the CFPB explains the conditions. FHA, VA and USDA loans have their own fees instead: choose the program in the form, or see the FHA, VA and USDA calculators.
Worked examples
The same loan over 30, 20 and 15 years
Keep $320,000 at 6.5% and change only the term. Over 30 years the payment is $2,022.62 and the interest comes to about $408,100. Over 20 years it’s $2,385.83 a month and about $252,600 of interest. Over 15 years it’s $2,787.54 a month and about $181,800. Lenders may quote a different rate for each term, so enter the rate you’re actually offered for each one.
10% down, with PMI, tax and insurance
On a $400,000 home with $40,000 down, you borrow $360,000 and principal and interest is $2,275.44. PMI at 0.5% a year adds $150 a month, property tax of $4,800 a year adds $400, and insurance of $1,800 a year adds $150, for a first payment of $2,975.44. With 20% down and the same tax and insurance, it would be $2,572.62.
Left alone, the PMI stops after payment 109, about 9 years in, having cost $16,350. If you tick the option to ask for it to be removed at 80%, it stops after payment 95, just under 8 years in, for $14,250 in all.
One bonus in the first year
Back on the $320,000 loan, put a one-time $10,000 toward payment 12. The required payment doesn’t change, but the loan ends 29 payments (2 years 5 months) sooner and about $50,500 less interest is paid.
Reading the amortization schedule
An amortization schedule lists every payment: its interest, its principal, any extra, tax and insurance, the total paid, the balance left and the interest paid to date. Switch between “By payment” and “By year”, download it as a CSV file, or print it. Every figure is in whole cents, as a lender bills it. How we calculate has the details.
Paying extra
Every extra dollar toward principal is a dollar that stops collecting interest for the rest of the loan. That is why even small extra payments early on can take years off a mortgage. You can add a fixed extra amount to every payment, or choose “Pay extra” on any single month in the schedule — for a bonus or a tax refund — and the calculator shows the interest saved and how much sooner the loan is paid off. See the extra payment, mortgage payoff and biweekly calculators for more. Check first that your loan has no prepayment penalty.
Things to check before you rely on the result
- Enter the interest rate, not the APR, which folds some fees in for comparing offers.
- Closing costs, prepaid interest, escrow cushions and HOA dues aren’t in this payment. The affordability calculator includes HOA dues.
- 20% down is a hard line for PMI: a dollar less and PMI is charged. Try both sides if you’re close.
- For a rate that can change, use the ARM calculator.
- The result is an estimate. Your lender’s Loan Estimate gives the official figures for a loan you’ve applied for.
Sharing a calculation
The address in your browser always holds the numbers you entered, so you can bookmark a scenario or send it to
someone. Those numbers live after the # in the link, which browsers never send to a website, so
they stay between you and whoever you share the link with.
Common questions
How is mortgage interest worked out each month?
It’s the balance times the yearly rate, divided by 12, rounded to the cent. On $320,000 at 6.5%, that’s $320,000 × 0.065 ÷ 12 = $1,733.33 for the first month.
When does PMI go away?
Automatically once the balance is scheduled to reach 78% of the original value, or at the loan’s midpoint. You can ask to cancel it at 80%, and extra payments get you there sooner.
Can I use a term other than 15 or 30 years?
Yes. Enter the term in years or months, anything from 1 month to 50 years.
Does it work for FHA, VA and USDA loans?
Yes. Choose the program and the calculator adds its upfront fee and any monthly insurance or annual fee, using the official rates as of the date shown on each program’s calculator.
Does it show the APR and the tax deduction?
Yes. The results always include the APR, which counts any points and lender fees you enter under “Points and lender fees”, plus program fees and mortgage insurance. Under “Tax deduction (estimate)”, choose a filing status to see an estimate of the federal tax the mortgage interest and property tax could save. It only saves anything when your itemized deductions beat the standard deduction. On this loan with $4,400 a year of property tax, a single filer in the 22% bracket would save about $1,979 in 2026, while a married couple filing jointly would save nothing, because their $32,200 standard deduction is bigger. How we calculate explains both.
How much equity will I have, and what is the loan really costing?
Under the schedule, “Equity and today's dollars” shows the home's value less what you owe at 1, 5, 10 years and on, at the rate of growth you assume. On this loan, with values rising 3% a year, equity would pass half the home's value after 10 years. It also shows the total paid in today's dollars: at 2% inflation, the $728,141 paid over 30 years is worth about $548,600 today.