How it works
A mortgage payment has up to five parts, often shortened to PITI: principal and interest on the loan, property taxes, home insurance, and sometimes private mortgage insurance (PMI) and HOA fees.
Monthly principal & interest = L × r(1 + r)^n ÷ ((1 + r)^n − 1)
Here L is the loan amount, r the monthly rate (yearly rate ÷ 12) and n the number of payments. Early payments are mostly interest; the principal share grows every month. The chart below shows the balance falling slowly at first, then faster.
Worked example
A $400,000 home with 10% down means borrowing $360,000. At 6.9% for 30 years, principal and interest come to $2,371 a month.
Add 1.1% property tax ($367 a month), $1,800 a year of insurance ($150 a month) and PMI at 0.5% ($150 a month) for a total of $3,038. Over 30 years you'd pay $493,546 in interest.
Put 20% down instead and there's no PMI: $2,624 a month. Choose a 15-year term and the monthly payment rises to $3,882, but total interest falls to $218,824.
Paying an extra $200 a month on the original loan saves $120,170 of interest and clears it 6 years 2 months early.
Things to know
- PMI. A conventional loan with less than 20% down usually requires private mortgage insurance, which protects the lender. By law it ends automatically when your balance is scheduled to reach 78% of the home's original value, and you can ask to remove it at 80%. This calculator stops charging it at 78%.
- Taxes and insurance vary. Property tax rates differ widely by state and county. Check the listing or the county assessor for the real figure.
- Your rate is personal. Credit score, down payment, loan type and points all change the rate you're offered. Compare Loan Estimates from several lenders.
- Closing costs are extra. They're paid upfront and aren't part of this monthly figure. Your Loan Estimate lists them.
Questions people ask
How much house can I afford?
A common guideline is to keep housing costs under 28% of your gross monthly income and all debt payments under 36%. Our home affordability calculator works backwards from your income and debts to the highest price that fits.
Is a 15-year or 30-year mortgage better?
A 15-year loan costs far less interest in total, $218,824 instead of $493,546 in the example above, but the monthly payment is higher. A 30-year loan keeps payments lower and more flexible, and you can still pay extra when you choose.
Do extra payments really help?
Yes. Every extra dollar goes straight to principal, so less interest builds up afterwards. Check that your lender applies extra payments to principal and doesn't charge a prepayment penalty.
Sources
- Consumer Financial Protection Bureau: what is private mortgage insurance?
- Consumer Financial Protection Bureau: when can I remove PMI from my loan?
- Freddie Mac: Primary Mortgage Market Survey (weekly average rates)
Reviewed September 25, 2026 by The Dollars World team. How we build and check our calculators · Our data and formulas. This is general information, not financial advice.