Mortgage Payment Calculator

A mortgage is a long-term home loan repaid in fixed monthly payments. The two biggest parts of the math are the amortization of the loan and the escrow items added on top — and the "on top" part is what surprises most first-time buyers.

Principal & interest

Monthly P&I = P × r × (1 + r)ⁿ / ((1 + r)ⁿ − 1)

• P = price − down payment
• r = annual rate ÷ 12 ÷ 100
• n = months (years × 12)

Escrow: tax, insurance and PMI

Your lender collects the annual property tax and home insurance in monthly chunks (annual ÷ 12) and pays them for you. If your down payment is under 20%, lenders also add private mortgage insurance (PMI) — roughly 0.5–1.5% of the loan per year — until you reach 20% equity.

Worked example

A $350,000 home, $70,000 down (20%), 6.5%, 30 years:

• P = $280,000, r = 0.00542, n = 360 → P&I ≈ $1,770/month
• Property tax $3,000/yr = $250/month; insurance $1,200/yr = $100/month
• 20% down → no PMI
• Total ≈ $2,120/month

Note what happens if the same buyer puts down 10% instead: the loan rises to $315,000 (P&I ≈ $1,992), and PMI adds roughly $263/month (1% of the loan per year). The $35,000 of extra down payment saves about $485 a month — a return few investments match.

How much interest you're really paying

Amortization is back-loaded: in year one of the example above, almost $1,510 of each $1,770 P&I payment is interest. Over 30 years the total interest works out to roughly $357,000 — more than the sticker price of the home itself. The split takes over a decade to flip in the borrower's favour, which is why any prepayment in the opening years is disproportionately valuable.

15 vs 30 years

The same $280,000 loan at 6.5%:

• 30 years → P&I ≈ $1,770/month, total interest ≈ $357,000
• 15 years → P&I ≈ $2,440/month, total interest ≈ $159,000

The 15-year payment is ~$670 higher every month, but it cuts about $198,000 of lifetime interest. If you can handle the higher payment without stretching, the shorter term (or a 30-year with disciplined early prepayments) is usually the better long-run choice.

Fixed vs adjustable

Fixed-rate mortgages keep the same P&I for the life of the loan — set-and-forget. ARMs start low and reprice periodically, so your "total monthly payment" line can move years later. The numbers here assume a fixed rate for the full term; for an ARM, recompute with the expected future rate.

Rule of thumb

Keep the total mortgage payment under 28% of gross monthly income — that's the classic affordability ceiling lenders use. On an all-in payment of $2,120, that rule points to a gross income of about $7,570/month. Lenders also layer the debt-to-income test (often ≤ 36% total debt), so clear your other obligations first.