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