Priya is a CMA with over 15 years of experience in the residential lending industry, specializing in helping first-time homebuyers navigate complex financing options.
Use our free mortgage calculator to estimate your monthly payment, including principal, interest, taxes, and insurance (PITI). Enter your home price, down payment, loan term, and interest rate to see a detailed breakdown of your costs.
Mortgage Calculator
Mortgage Formula
This calculator uses the standard formula to determine the principal and interest portion of your monthly payment:
Formula Source: NerdWallet
- M = Monthly Payment
- P = Principal Loan Amount (Home Price – Down Payment)
- i = Monthly Interest Rate (Your annual rate divided by 12)
- n = Number of Payments (Loan term in years x 12)
Your total estimated monthly payment (PITI) is calculated by adding estimated monthly property taxes, homeowner’s insurance, and, if applicable, Private Mortgage Insurance (PMI) to the principal and interest payment (M).
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What is a Mortgage?
A mortgage is a loan from a bank or other financial institution that helps a borrower purchase a home. The property itself serves as collateral for the loan. When you get a mortgage, you agree to repay the loan, plus interest, over a set period, known as the loan term (e.g., 15 or 30 years).
Your monthly mortgage payment is typically composed of four parts, known as PITI:
- Principal: The portion of your payment that goes toward paying down the original loan balance.
- Interest: The fee you pay to the lender for borrowing the money.
- Taxes: The portion that covers your property taxes, which the lender usually collects and holds in an escrow account to pay on your behalf.
- Insurance: The portion that covers your homeowner’s insurance, also typically held in escrow. If your down payment is less than 20%, this may also include Private Mortgage Insurance (PMI).
Understanding these components is crucial for budgeting accurately for homeownership, as your total monthly housing cost will be more than just the principal and interest payment.
How to Calculate a Mortgage Payment (Example)
Let’s walk through an example to see how the payment is calculated.
Example Scenario:
- Home Price: $350,000
- Down Payment: $70,000 (20%)
- Loan Term: 30 years
- Interest Rate: 6.5%
- Annual Property Tax: $4,200
- Annual Home Insurance: $1,500
-
Calculate Principal (P):
$350,000 (Home Price) – $70,000 (Down Payment) = $280,000
-
Calculate Monthly Interest (i):
6.5% (Annual Rate) / 100 = 0.065
0.065 / 12 months = 0.0054167 -
Calculate Number of Payments (n):
30 (Years) x 12 (Months) = 360 payments
-
Calculate Principal & Interest (M):
M = 280,000 [ 0.0054167(1 + 0.0054167)^360 ] / [ (1 + 0.0054167)^360 – 1 ]
M = $1,769.96 (This is your P&I payment) -
Calculate Monthly Taxes & Insurance:
Taxes: $4,200 / 12 = $350.00
Insurance: $1,500 / 12 = $125.00 -
Calculate PMI:
Since the down payment is 20%, PMI is $0.
-
Calculate Total Monthly Payment (PITI):
$1,769.96 (P&I) + $350.00 (Taxes) + $125.00 (Insurance) + $0 (PMI) = $2,244.96
Frequently Asked Questions (FAQ)
PITI stands for Principal, Interest, Taxes, and Insurance. These are the four components of a typical monthly mortgage payment. Lenders look at your PITI to determine the affordability of your loan.
PMI is a type of insurance required by lenders if your down payment on a conventional loan is less than 20% of the home’s purchase price. It protects the lender in case you default on the loan. It is usually canceled automatically once your loan-to-value ratio reaches 78% (meaning you have 22% equity).
A fixed-rate mortgage has an interest rate that remains the same for the entire life of the loan, providing a stable, predictable-monthly payment. An adjustable-rate mortgage (ARM) has an interest rate that can change over time, typically after an initial fixed period. ARMs often start with a lower rate but carry the risk that your payment could increase in the future.