Mortgage Payment Formula
Where M = monthly payment, P = principal (loan amount), r = monthly interest rate (annual rate ÷ 12), n = total number of payments (years × 12).
15-Year vs. 30-Year Mortgage
| Feature | 15-Year | 30-Year |
|---|---|---|
| Monthly payment | Higher | Lower |
| Total interest paid | Much less | Much more |
| Equity build-up | Faster | Slower |
| Interest rate | Usually lower | Usually higher |
| Best for | Paying off quickly | Lower monthly cost |
Amortization Schedule
Calculate using the tool, then the year-by-year breakdown appears below.
Frequently Asked Questions
How is a mortgage monthly payment calculated?
The formula M = P[r(1+r)^n]/[(1+r)^n-1] uses the loan amount, monthly interest rate, and total number of payments to produce a fixed monthly payment that covers both interest and principal paydown.
What is amortization?
Amortization is the process of gradually paying off a loan through scheduled payments. Early payments are mostly interest; later payments shift more toward principal as the balance shrinks.
Does this include property tax and insurance?
The base calculation covers principal and interest only. Use the optional fields to add property tax and insurance for a full monthly cost (PITI) estimate.
What is PMI?
Private Mortgage Insurance is required by most US lenders when your down payment is below 20%. It costs roughly 0.5%–1.5% of the loan per year and can be removed once you reach 20% equity.
Should I choose a 15 or 30-year mortgage?
A 15-year loan has higher payments but far less total interest. A 30-year loan is more affordable month-to-month but costs significantly more over the life of the loan. The right choice depends on your budget and goals.
Can I pay off my mortgage early?
Yes — making extra principal payments reduces your balance faster and cuts total interest dramatically. Even one extra payment per year can shave years off a 30-year mortgage.