A fixed-rate mortgage payment has two layers. The core is principal and interest (P&I), which is set by the loan amount, the rate and the term using the standard amortization formula. On top of that most lenders collect property tax and homeowners insurance through an escrow account, plus private mortgage insurance (PMI) when you put down less than 20% on a conventional loan, and you may owe HOA dues separately. The sum is often called PITI. On a $400,000 home with 20% down at 6.5% for 30 years, P&I is $2,022.62 a month; with $4,000 a year of tax and $1,500 of insurance the payment is about $2,481.
The Consumer Financial Protection Bureau explains that early payments are mostly interest because the balance is highest, and that the share going to principal grows over time. The balance-by-year table above shows exactly that.
How to use the mortgage calculator
- Enter the home price and your down payment as a percentage of the price.
- Enter the interest rate and choose the term. The 6.5% default is only a planning figure, so replace it with a quoted rate.
- Enter yearly property tax and insurance. Your county assessor and insurer can give real numbers, and your Loan Estimate lists escrow amounts.
- If your down payment is under 20%, adjust the PMI rate to the lender’s quote. Add HOA dues if the property has them.
- Read the monthly total, the P&I share, total interest over the life of the loan and the balance at years 1, 5, 10 and onward.
Formula
Each month the interest charged is the balance × r. The rest of the P&I payment reduces the balance, which is why the table's balance falls slowly at first and faster later.
Worked example
A $400,000 home, 20% down, 6.5% fixed for 30 years, $4,000/yr property tax and $1,500/yr insurance.
- Loan: $400,000 − $80,000 = $320,000. Monthly rate r = 0.065 ÷ 12 = 0.0054167; n = 360.
- P&I = 320,000 × 0.0054167 ÷ (1 − 1.0054167−360) = $2,022.62.
- Escrow: $4,000 ÷ 12 = $333.33 tax and $1,500 ÷ 12 = $125.00 insurance. No PMI at 20% down.
- Monthly payment ≈ $2,022.62 + $333.33 + $125.00 = $2,480.95.
- Total interest over 30 years: $2,022.62 × 360 − $320,000 ≈ $408,142.
How the term and rate change the payment
Shorter terms raise the monthly payment but cut total interest sharply. The same $320,000 at 6.5% over 15 years costs about $2,788 a month in P&I but roughly $181,700 in total interest, less than half of the 30-year figure. A one-point change in rate moves a 30-year P&I payment on $320,000 by roughly $200 a month. Compare scenarios by changing one input at a time.
The interest rate is not the full cost of borrowing. Lender fees and points are folded into the APR, which the apr calculator estimates. Lenders also look at your debt-to-income ratio before approving a payment of this size.
What this calculator leaves out
It assumes a fixed rate for the full term, payments starting one month after closing, and constant tax, insurance and HOA amounts. Real escrow amounts are reset each year. Adjustable-rate loans, FHA mortgage insurance premiums, VA funding fees, closing costs and prepaid interest are not modelled. For the general case of any fixed-rate installment loan use the loan calculator.
Caveats and assumptions
- The 6.5% rate and 0.5% PMI rate are our planning defaults, not quotes. Rates change daily and depend on credit, loan type and points.
- Property tax and insurance vary widely by county and insurer; escrow amounts are recalculated every year.
- Conventional PMI can usually be cancelled once you reach enough equity; this calculator keeps it constant for simplicity.
- Results are rounded to the cent; your lender’s schedule may differ by a few cents because of rounding conventions.
Frequently asked questions
What is the monthly payment on a $320,000 mortgage at 6.5% for 30 years?
Principal and interest is $2,022.62 a month. Taxes, insurance, PMI and HOA dues are added on top.
What does PITI mean?
Principal, interest, taxes and insurance: the four parts of a typical mortgage payment when the lender collects taxes and insurance through escrow.
How is a mortgage payment calculated?
Payment = L × r ÷ (1 − (1 + r)^−n), where L is the loan amount, r is the annual rate divided by 12 and n is the number of monthly payments.
Do I have to pay PMI?
On conventional loans lenders usually require private mortgage insurance when the down payment is under 20% of the price. Government-backed loans have their own insurance or fee rules.
Why does most of my early payment go to interest?
Interest each month is charged on the remaining balance, which is largest at the start. As the balance falls, more of the same payment goes to principal. The CFPB calls this amortization.
Sources
- CFPB — How does paying down a mortgage work? — amortization and why payments are interest-heavy early
- CFPB — What is an escrow or impound account? — taxes and insurance collected with the payment
- CFPB — What is a Loan Estimate? — where to find your quoted rate, payment and escrow
- CFPB — Mortgage interest rate vs. APR — rate vs. annual percentage rate
This calculator gives estimates for planning and education only. It is not financial, tax or investment advice. Your lender, card issuer, employer or tax authority uses its own terms, fees and rounding, so confirm figures with them before deciding. See our disclaimer and how we build and check calculators.