Your monthly mortgage payment is more than just paying back the loan. Most of it is principal and interest, but taxes, insurance and — if your down payment is small — mortgage insurance ride along too. Here's exactly how each part is calculated, with a worked example. The free mortgage calculator does it all instantly.
What makes up a payment (PITI)
Lenders describe a payment with the acronym PITI:
- Principal — the portion that pays down the loan balance.
- Interest — the lender's charge on the outstanding balance.
- Taxes — property tax, usually collected monthly into escrow.
- Insurance — homeowner's insurance, plus PMI if applicable.
Homeowners-association (HOA) dues, where they apply, are on top of PITI.
The principal & interest formula
Principal and interest use the standard amortized-loan formula:
M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)
where P is the loan amount (home price minus down payment), r is the monthly interest rate (annual APR ÷ 12 ÷ 100), and n is the number of monthly payments (years × 12). The payment stays level for the life of the loan; early on most of it is interest, and over time more goes to principal.
Worked example
A $400,000 home, 20% down, 30-year loan at 6.5%.
- Loan amount P = 400,000 − 80,000 = $320,000
- Monthly rate r = 6.5 ÷ 12 ÷ 100 = 0.005417
- Payments n = 30 × 12 = 360
Plugging in gives a principal & interest payment of about $2,023 a month. Over 360 months that's roughly $728,000 paid in total — about $408,000 of it interest.
Taxes, insurance & PMI
Add the monthly share of each yearly cost:
- Property tax: annual tax ÷ 12. On our example, $4,800/yr ≈ $400/mo.
- Home insurance: annual premium ÷ 12. Say $1,800/yr ≈ $150/mo.
- PMI: charged while your down payment is under 20%, typically 0.3%–1.5% of the loan per year ÷ 12. At 20% down there's no PMI.
So the full PITI here is roughly 2,023 + 400 + 150 = $2,573 a month. Change any input in the calculator and every figure updates live.
FAQ
Why is so much of an early payment interest? Interest is charged on the outstanding balance, which is highest at the start. As the balance falls, the interest share shrinks and the principal share grows.
How can I lower my payment? A bigger down payment, a lower rate, or a longer term each reduce the monthly figure — though a longer term raises total interest.
When does PMI go away? Usually once you reach 20% equity, either through payments or rising home value; many loans let you request cancellation at that point.
Is my data private? Yes — the calculator runs in your browser and stores nothing.