How to Calculate Mortgage Payments (Without the Math Panic!)

Thinking about buying a home? Before you start browsing listings, it’s important to know what kind of mortgage payment you can afford.

The good news? You don’t need to be a math whiz to figure it out. We’ll break it down step by step—and yes, we’ve got an infographic too!

🙋 What Is a Mortgage?

A mortgage is a loan you get to buy a home. You borrow money from a lender (like a bank), then pay it back each month over several years—with interest.

Your monthly payment usually includes:

1. Principal – the amount you borrowed
2. Interest – the fee the lender charges you
3. Taxes – property taxes (sometimes included)
4. Insurance – homeowner’s insurance (and sometimes mortgage insurance too)

🧮 How to Calculate Your Monthly Mortgage Payment

Let’s start with the basics.

Here’s the formula for calculating just the principal and interest:

M = P[r(1 + r)^n] / [(1 + r)^n – 1]

Don’t worry—it looks worse than it is! Let’s break down what each letter means:

⚙️ Example: Let’s Do the Math Together

Let’s say you’re buying a home and borrowing $300,000 at a 5% annual interest rate for 30 years.

1. P = 300,000
2. r = 5% ÷ 12 = 0.004167
3. n = 30 × 12 = 360 months

Plug it into the formula:

M = 300,000[0.004167(1 + 0.004167)^360] / [(1 + 0.004167)^360 – 1]

M ≈ $1,610.46/month (principal + interest only)

🎯 This is your base monthly payment. You’ll still need to add taxes and insurance!

🏠 Mortgage Calculator

Enter the principal amount, interest rate and term. The tool will calculate the monthly payment

📦 Don’t Forget the Extras!

Most mortgage payments include:

• Property Taxes: Varies by location
• Homeowner’s Insurance: Protection for your property
• PMI (Private Mortgage Insurance): If your down payment is under 20%

These can add hundreds more per month. Your lender or real estate agent can give you an estimate.

✅ Quick Recap