How to Calculate Mortgage Payments
A mortgage payment usually starts with principal and interest, then may include property tax, home insurance, PMI, HOA dues, and optional extra principal payments.
Mortgage payment formula
The standard principal and interest formula is: M = P * r * (1 + r)^n / ((1 + r)^n - 1). P is the loan amount, r is the monthly interest rate, and n is the number of monthly payments.
What to add after principal and interest
- Monthly property tax: annual tax divided by 12.
- Monthly insurance: annual home insurance divided by 12.
- PMI: often estimated as an annual percentage of the loan balance when the down payment is below 20%.
- HOA: monthly association dues, if applicable.
- Extra payment: additional principal payment that may shorten payoff time.
Example
For a 280,000 loan at 6.5% for 30 years, the principal and interest payment is about 1,770 per month. Taxes, insurance, PMI, and HOA can raise the full housing payment above that number.