How to Calculate Your Mortgage Payment: Formula, Examples and Tips
A mortgage calculator answers the first question every home buyer asks: what will this actually cost me each month? Knowing the answer before you speak to a lender puts you in control. You can see how the price, your deposit, the interest rate and the loan term each change the payment, and how much you will pay in interest over the life of the loan.
This guide explains the mortgage payment formula in plain terms, works through real examples, and shows the choices that save the most money.
What goes into a mortgage payment
A standard repayment mortgage has a fixed monthly payment made of two parts:
- Principal, the part that pays back what you borrowed.
- Interest, the lender's charge for lending it to you.
In the early years most of each payment is interest. As the balance falls, the interest falls with it, and more of each payment goes to the principal. That is why the year-by-year schedule in our calculator shows interest shrinking and principal growing every year.
Your lender may also collect property tax, home insurance and mortgage insurance with the payment. Those vary by location and are not part of the formula below, so our calculator shows principal and interest on its own.
The mortgage payment formula
The monthly payment on a fixed-rate mortgage is:
M = P × i ÷ (1 − (1 + i)^−n)
- M is the monthly payment.
- P is the amount you borrow: the price minus your down payment or deposit.
- i is the monthly interest rate: the yearly rate divided by 12.
- n is the number of payments: the term in years times 12.
A worked example
Say you buy a $300,000 home with a $60,000 down payment, so you borrow $240,000 at 6.5% a year over 30 years.
- P = 240,000
- i = 0.065 ÷ 12 = 0.0054167
- n = 30 × 12 = 360
That gives a monthly payment of $1,516.96. Over 360 payments you repay $546,107 in total, of which $306,107 is interest, more than the amount you borrowed.
In the very first month, $1,300 of the payment is interest and only $216.96 reduces the loan. By the final years that balance has flipped.
You can check every figure here with our Mortgage Calculator, which also shows the full repayment schedule.
How the term changes what you pay
Keep the same $240,000 at 6.5%, but repay it over 15 years instead of 30:
- 30 years: $1,516.96 a month, $306,107 total interest.
- 15 years: $2,090.66 a month, $136,318 total interest.
The shorter term costs $573.70 more each month but saves almost $170,000 in interest. A longer term makes the monthly payment more affordable; a shorter term makes the home far cheaper overall.
How much the interest rate matters
Rates move, and a single percentage point makes a large difference. The same $240,000 over 30 years:
- At 5.5%: $1,362.69 a month and $250,570 in interest.
- At 6.5%: $1,516.96 a month and $306,107 in interest.
- At 7.5%: $1,678.11 a month and $364,121 in interest.
Each point is roughly $150 to $160 a month and more than $55,000 over the life of the loan, which is why comparing lenders and improving your credit before you apply can be worth a lot.
Your down payment and loan-to-value
Loan-to-value, or LTV, is the loan as a percentage of the price. Borrowing $240,000 on a $300,000 home is an 80% LTV. Put down 10% instead and you borrow $270,000, which at 6.5% over 30 years is $1,706.58 a month and $344,370 in interest.
A bigger deposit lowers the payment and usually earns a better rate. In many countries, borrowing more than 80% of the price also means paying for mortgage insurance: private mortgage insurance (PMI) in the United States, mortgage default insurance such as CMHC in Canada, and lenders mortgage insurance (LMI) in Australia. Our calculator reminds you when your deposit is under 20%.
Overpaying: the simplest way to save
Paying a little more than you have to each month goes straight to the principal, and every extra pound, dollar or euro stops earning interest for the rest of the loan.
On the same $240,000 at 6.5% over 30 years, an extra $200 a month saves about $96,270 in interest and pays the mortgage off 8 years and 2 months early. Even $150 a month saves about $79,000.
Before you overpay, check whether your lender limits overpayments or charges an early repayment fee, which is common on fixed-rate deals in the UK and Europe.
Mortgages in different countries
The formula is the same everywhere, but the conventions are not:
- Canada compounds fixed-rate mortgages semi-annually, not monthly, as required by law. The same quoted rate therefore gives a slightly lower payment. On C$480,000 at 4.5% over 25 years, that is C$2,656.67 a month instead of C$2,668.00. Canadians also talk about the amortization period rather than the loan term.
- The United Kingdom, Ireland, Australia and New Zealand say deposit rather than down payment, and UK terms of 35 or 40 years are increasingly common.
- Most of Europe uses monthly compounding like the United States, but fixed periods are often shorter than the full term, so the rate is reset every few years.
Our calculator covers 15 countries, sets the local currency and wording, and uses semi-annual compounding for Canada automatically. You can also switch it on or off yourself.
Mortgage calculator FAQ
Is a 15-year or 30-year mortgage better? A 15-year mortgage saves a large amount of interest but needs a much higher payment. A 30-year mortgage keeps the payment affordable, and you can still overpay when money allows.
Does the calculator include taxes and insurance? No. It shows principal and interest, which is the part set by the loan itself. Ask your lender for the full monthly cost.
How is this different from an EMI calculator? It is the same formula. Our Loan / EMI Calculator suits car and personal loans, and our guide on how EMI is calculated explains the formula in more detail.
Work out your own payment
Choose your country, enter the price, your deposit, the rate your lender offers and the term, and our free Mortgage Calculator gives you the monthly payment, the total interest and a year-by-year schedule you can download. It runs in your browser and takes a few seconds.
Want to see what the repayments would be?