How the Monthly Payment Is Calculated
M = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1)
Where P is the loan amount (home price − down payment), r is the monthly rate (annual ÷ 12), and n is the number of payments (years × 12). Property tax and insurance are divided by 12 and added on top — together this is your PITI payment.
Example: $350,000 home, 20% down ($70,000), 6.5% for 30 years → loan $280,000 → principal & interest ≈ $1,770/month. Adding $350/month tax and $125/month insurance gives a PITI of ≈ $2,245/month.
Smart Mortgage Moves
- 20% down avoids PMI — private mortgage insurance typically costs 0.5–1.5% of the loan yearly.
- Compare 15 vs 30 years live — flip the term above and watch total interest change dramatically.
- The 28% rule — lenders prefer PITI under 28% of gross monthly income.
- Rate shopping pays — even 0.25% lower saves five figures over 30 years. Test it above.
Comparing other loans? Try our EMI Calculator for car and personal loans, or the Compound Interest Calculator for savings.
Frequently Asked Questions
How is a monthly mortgage payment calculated?
Principal & interest use the amortization formula M = P × r × (1+r)ⁿ ÷ ((1+r)ⁿ − 1); property tax and insurance are added monthly to form the full PITI payment.
What is PITI?
Principal, Interest, Taxes and Insurance — the four parts of a typical mortgage payment. Lenders like PITI below 28% of gross monthly income.
How much down payment do I need?
Typically 5–20%. At least 20% down avoids PMI and cuts both monthly payment and total interest.
Should I choose a 15-year or 30-year mortgage?
30-year = lower payments, ~double the interest. 15-year = higher payments, far less interest and faster equity. Compare both live above.