How it's calculated
Your monthly house payment has up to five parts, often shortened to PITI: principal and interest on the loan, property tax, homeowners insurance, plus private mortgage insurance (PMI) and HOA dues when they apply. Lenders usually collect the tax and insurance each month into an escrow account and pay those bills for you.
Principal and interest is the only part set by the loan itself. It stays the same every month on a fixed-rate mortgage. What changes is the split: early payments are mostly interest because the balance is high, and as the balance falls more of each payment goes to principal. The CFPB calls this process amortization.CFPB
PMI protects the lender, not you, and is typically required on a conventional loan when you put down less than 20% of the purchase price.CFPB PMI prices vary by lender, credit score and down payment, so the calculator asks you for the annual rate your lender quotes. It appears on your Loan Estimate.
The formula
- Loan amount = home price − down payment.
- Monthly principal and interest = L × r ÷ (1 − (1 + r)−n), where L is the loan amount, r is the annual rate ÷ 12 and n is the number of monthly payments (360 for 30 years). At a 0% rate it is simply L ÷ n.
- Each month's interest = the remaining balance × the annual rate ÷ 12, rounded to the cent. The rest of the payment reduces the balance. The final payment is whatever is left.
- Property tax and insurance = the annual amounts ÷ 12.
- PMI (only when the down payment is under 20%) = your annual PMI rate × the original loan amount ÷ 12.
- When PMI ends: under the Homeowners Protection Act, the servicer must end PMI automatically on the date your balance is first scheduled to reach 78% of the home's original value, based on the original amortization schedule. If that hasn't happened by the midpoint of the loan term, it ends the month after the midpoint.CFPB You can ask to cancel it earlier, once the balance reaches 80%.CFPB
This is the same math behind the CFPB's sample Loan Estimate, where a $162,000 loan at 3.875% for 30 years shows a monthly principal and interest payment of $761.78.CFPB Our tests reproduce that figure to the cent.
Worked example
A $400,000 home with 20% down at 6.5% for 30 years borrows $320,000. Principal and interest come to $2,022.62 a month. With $4,800 a year of property tax and $1,800 of insurance, the full payment is $2,573.
| Line | Monthly |
|---|---|
| Principal & interest | $2,023 |
| Property tax | $400 |
| Homeowners insurance | $150 |
| Monthly payment | $2,573 |
Over 30 years that loan costs $408,141 in interest.
With 10% down and a 0.5% PMI rate, the same home adds $150.00 a month of PMI. It ends in Jan 2036 (payment 109, 78% of original value).
| Line | Monthly |
|---|---|
| Principal & interest | $2,275 |
| Property tax | $400 |
| Homeowners insurance | $150 |
| PMI (until Jan 2036) | $150 |
| Monthly payment | $2,975 |
Assumptions and limitations
- Fixed rate. Adjustable-rate mortgages change payment after the fixed period; this calculator does not model rate resets.
- Taxes and insurance stay flat. Property tax and insurance usually rise over time, and your escrow payment changes with them.
- PMI is a flat monthly premium on the original loan. Some policies are paid upfront, split between upfront and monthly, or recalculated. Your Loan Estimate shows the actual premium.
- PMI end date uses the original schedule. Extra payments don't move the automatic termination date, though they can let you request cancellation sooner. FHA mortgage insurance follows HUD's own rules; see the FHA loan calculator.
- No closing costs, points or APR. Use your Loan Estimate to compare the APR of competing offers.
- The first payment month is an assumption. Change it under advanced options to get exact dates.
For how rate, term and down payment change the total cost, read how mortgage payments work.