How to Calculate Mortgage Payments
A mortgage payment formula helps you determine your monthly home loan payment, including principal and interest (excluding taxes and insurance).
Mortgage Payment Formula
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- M = Monthly mortgage payment
- P = Loan principal (home price minus down payment)
- r = Monthly interest rate
- n = Total number of monthly payments
Step-by-Step:
- 1
Calculate principal
Subtract your down payment from the home price.
- 2
Convert interest rate
Divide annual rate by 12 for monthly rate.
- 3
Calculate total payments
Multiply loan term in years by 12.
- 4
Apply the formula
Plug values into the mortgage formula.
Worked Examples:
$300,000 home with 20% down
Home Price: $300,000Down Payment: 20%Rate: 7%Term: 30 years
Result: $1,597/month
P = $240,000. r = 0.07/12. n = 360. M = 240000 × [0.00583(1.00583)^360] / [(1.00583)^360 - 1]