How to Calculate Your Mortgage Payment Manually

The Mortgage Payment Formula

The standard formula for calculating a fixed-rate mortgage payment is:

M = P × [r(1+r)^n] / [(1+r)^n - 1]

Where:

• M = Monthly payment

• P = Principal (loan amount)

• r = Monthly interest rate (annual rate ÷ 12 ÷ 100)

• n = Total number of payments (years × 12)

Example Calculation

For a $400,000 home with 20% down ($80,000), 6.5% interest rate, 30-year term:

• P = $320,000

• r = 6.5 / 12 / 100 = 0.00542

• n = 30 × 12 = 360

• M = $320,000 × [0.00542(1.00542)^360] / [(1.00542)^360 - 1]

• M ≈ $2,023 per month (principal and interest only)

Beyond Principal & Interest

Your actual monthly payment typically includes:

• Property taxes: Usually 1-2% of home value per year

• Homeowner's insurance: Typically $100-300/month

• PMI: Required if down payment is under 20%, usually 0.5-1% of loan per year

• HOA fees: If applicable, varies widely

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