How to Calculate Your Monthly Mortgage Payment
Your monthly mortgage payment is calculated using this formula: M = P × r(1+r)^n / ((1+r)^n − 1), where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the number of payments (years × 12).
Example: A $300,000 loan at 6.5% for 30 years → monthly rate = 0.065/12 = 0.005417, n = 360 payments → monthly payment = $1,896. Total paid = $682,560. Total interest = $382,560 — more than the original loan.
The difference between a 15-year and 30-year mortgage is significant. A 30-year spreads payments but costs far more in interest. A 15-year mortgage typically has a lower interest rate and you build equity faster, but the monthly payment is about 50% higher.
What Affects Your Mortgage Payment?
- Loan amount: Lower down payment = higher principal = higher payment
- Interest rate: Each 0.5% rate change affects monthly payment by roughly $30 per $100k borrowed
- Loan term: 15-year has ~40% higher monthly payment but saves ~50% in total interest vs 30-year
- Property tax and insurance: Added to your monthly payment as escrow (PITI)
Frequently Asked Questions
What is a good mortgage interest rate in 2025?+
In 2025, rates for a 30-year fixed mortgage range approximately 6.25%–7.25% for well-qualified borrowers. Your rate depends on credit score, down payment, loan type, and lender. A 740+ credit score typically gets the best rates.
How much house can I afford?+
A common guideline: your total housing payment (PITI) should not exceed 28% of gross monthly income, and total debt payments should not exceed 36–43%. With $6,000/month gross income, maximum PITI is roughly $1,680–$2,580.
What is PMI and when can I remove it?+
Private Mortgage Insurance (PMI) is required when your down payment is less than 20%. It typically costs 0.5%–1.5% of the loan amount annually. You can request PMI removal once you reach 20% equity (80% loan-to-value ratio).
Should I choose a 15-year or 30-year mortgage?+
A 30-year gives lower monthly payments and more cash flow flexibility. A 15-year saves enormous amounts in interest (often $150,000+) and builds equity faster, but requires a higher monthly commitment. Choose 15-year if you can comfortably afford the payment.