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How to Calculate Your Mortgage Payments: A Complete Guide

Learn how to calculate your mortgage payments with step-by-step methods, understand key factors like interest rates and loan terms, and use our free mortgage calculator.

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Finance Team
Finance Team
March 04, 2025
10 min read

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How to Calculate Your Mortgage Payments: A Complete Guide
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What is a Mortgage Payment?

A mortgage payment is the monthly amount you pay to your lender to repay a home loan. It typically includes principal, interest, taxes, and insurance (PITI). Understanding how it’s calculated helps you budget and plan for homeownership.

Principal

Loan amount

Interest

Cost of borrowing

Taxes & Insurance

Added costs

The Mortgage Payment Formula

The standard formula for a fixed-rate mortgage payment is based on the loan amount, interest rate, and term. Here it is:

M = P [ r(1 + r)^n ] / [ (1 + r)^n – 1 ]
Variables

M = Monthly payment
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Number of payments (term in months)

Quick Tip

Use our calculator to avoid complex math!

Key Factors Affecting Payments

Several elements determine your monthly mortgage payment. Understanding them can help you make informed decisions.

Rate

Interest Rate

Higher rates increase payments

Term

Loan Term

Shorter terms raise monthly costs

Other Costs

Property taxes (~1% of home value)
Insurance ($50–$150/month)
HOA fees (if applicable)

Mortgage Calculation Examples

Let’s walk through two examples to see how it works in practice.

Example 1: 30-Year Loan

Loan: $200,000
Rate: 4% (0.00333 monthly)
Term: 360 months
M = $954.83 (principal + interest)

Example 2: 15-Year Loan

Loan: $200,000
Rate: 3.5% (0.00292 monthly)
Term: 180 months
M = $1,429.77 (principal + interest)

Tips to Save on Your Mortgage

Payment Strategies

  • Make extra payments
  • Refinance for lower rates
  • Bigger down payment

Planning Tips

  • Shop for best rates
  • Choose shorter terms
  • Use our calculator

Conclusion

Calculating your mortgage payment doesn’t have to be overwhelming. With the right formula and an understanding of key factors, you can take control of your finances. Use our free mortgage calculator to simplify the process and start planning your homeownership journey today!

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Finance Team

Finance Team

Mortgage & Finance Specialists

Our finance team consists of mortgage experts, financial advisors, and analysts committed to providing clear, actionable insights for homeowners and buyers.