How to Calculate Your Mortgage Payment (Formula + Examples)
Learn the mortgage payment formula, what PITI means, and how to estimate your monthly housing cost before you shop.
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Key Takeaways
- 1Monthly payment = principal + interest (P&I); budget for PITI (taxes + insurance too).
- 2A $350,000 loan at 7% for 30 years = roughly $2,329/month principal and interest.
- 3Every 1% rate increase adds roughly $200/month on a $350,000 loan.
- 420% down avoids PMI and lowers your monthly payment significantly.
Before house hunting, know your number. Mortgage payments depend on loan amount, interest rate, term, and whether you include taxes and insurance. Our mortgage calculator handles the math instantly.
Understanding the formula helps you spot bad deals and negotiate with confidence.
The Mortgage Payment Formula
Monthly P&I = P × [r(1+r)^n] / [(1+r)^n − 1], where P = principal, r = monthly rate, n = total payments. For a $350,000 loan at 7% over 30 years, that equals about $2,329/month.
Add property taxes (~1–2% of value annually), homeowners insurance ($1,000–$2,500/year), and PMI if down payment is under 20%.
What Changes Your Payment
Interest rate has the biggest impact. On a $350,000 loan, 6% costs $2,098/month vs $2,329 at 7% — a $231 difference. Over 30 years that is $83,000 in extra interest.
Shorter terms cost more monthly but far less total interest. A 15-year mortgage on the same loan at 7% runs $3,145/month but saves over $200,000 in interest.
From Payment to Purchase Price
Lenders typically cap housing costs at 28% of gross income. At $8,000/month income, that is $2,240 for PITI — which may support a $300,000–$350,000 home depending on taxes and rates.
Use our how much house can I afford guide to work backward from income to price range.
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