How a mortgage payment is calculated
The principal-and-interest part of the payment comes from the standard amortization formula. Everything else — property tax, insurance, HOA and PMI — is added on top, which is why the number your lender quotes is larger than a payment calculator that shows only P&I.
Each payment is split between interest on the balance still outstanding and principal that reduces it. Early on almost all of it is interest; the crossover comes surprisingly late.
Worked example: $400,000 home, 20% down, 6.5% over 30 years
A 20% deposit of $80,000 leaves $320,000 to borrow. At 6.5% over 30 years the principal and interest come to $2,022.62 a month. Property tax at 1.1% of value adds $366.67 and insurance $150.00, for a total of $2,539.29 a month. Over the full term the interest alone comes to $408,141 — more than 128% of the amount borrowed.
At 20% down there is no PMI. Putting 5% down instead would mean borrowing $380,000 at 95% LTV, adding $174.17 a month in PMI until the balance reaches 78% of the home's value in month 135 — $23,513 in total.
What the term does to the same loan
| Term | Principal & interest | Total interest | Interest saved vs 30 years |
|---|---|---|---|
| 30 years | $2,022.62 | $408,141 | — |
| 20 years | $2,385.83 | $252,601 | $155,539 |
| 15 years | $2,787.54 | $181,758 | $226,382 |
On a $320,000 loan at 6.5%. Shorter terms cost more each month and far less overall.
Payments by home price
| Home price | Loan at 20% down | Principal & interest |
|---|---|---|
| $200,000 | $160,000 | $1,011.31 |
| $300,000 | $240,000 | $1,516.96 |
| $400,000 | $320,000 | $2,022.62 |
| $500,000 | $400,000 | $2,528.27 |
| $750,000 | $600,000 | $3,792.41 |
| $1,000,000 | $800,000 | $5,056.54 |
At 6.5% over 30 years, principal and interest only. 57 price points have their own page.
Frequently asked questions
What is included in a monthly mortgage payment?
Four things, known as PITI: principal, interest, property taxes and homeowner's insurance. If you put down less than 20% you also pay private mortgage insurance (PMI), and some homes carry HOA dues. On a $400,000 home with 20% down at 6.5%, principal and interest alone are $2,022.62, and the full payment is $2,539.29.
When does PMI stop?
PMI is required above 80% loan-to-value and, under the Homeowners Protection Act, the lender must cancel it automatically once the balance reaches 78% of the original value. With $20,000 down on a $400,000 home, that takes about 11 years 3 months and costs $23,513 along the way. You can usually request cancellation earlier at 80%.
Does a 15-year mortgage really save that much?
On the same $320,000 loan at 6.5%, a 15-year term costs $2,787.54 a month against $2,022.62 over 30 years — but total interest falls from $408,141 to $181,758, a saving of $226,382.
Is the default interest rate a live market rate?
No. The rate is your input; the starting value is a plausible default, not a quoted average. Use the rate your lender has actually offered you, because a rate you are quoted is the only one that determines your payment.
Related tools
- Amortization schedule — every payment on this loan, with CSV export
- Paycheck calculator — the take-home pay this payment comes out of
- Take-home pay by state — how much of a salary survives tax where you are buying