Mortgage Payment Formula Explained
The Mortgage Payment formula explained in plain English: the equation behind the Mortgage Payment Calculator, its variables, and the assumptions it makes.
By Onias Derilus, Mortgage Capital · NMLS# 1859012 · Last Updated: June 2026
It estimates your full monthly housing cost — principal, interest, property taxes, and homeowners insurance (PITI). You enter a home price, down payment, rate, and term.
The Mortgage Payment Formula, Explained
M = L × r(1 + r)^n / [ (1 + r)^n − 1 ]
L is the loan amount (price minus down payment), r is the monthly rate (the annual rate divided by 12), and n is the number of payments (years times 12). The result M is your monthly principal and interest.
Taxes and insurance are layered on top: yearly property tax and insurance are each estimated as a percentage of the home price, then divided by twelve to get a monthly figure. HOA dues and mortgage insurance are not included in the base formula.
The formula is only the starting point. Open the mortgage payment calculator to plug in your own numbers and see the result instantly. For a rate tied to your actual file, talk to a licensed broker before you decide.
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Rates are illustrative only. APR and payments vary by credit score, loan amount, and market conditions. Subject to credit approval. Not a commitment to lend. NMLS# 1859012. Equal Housing Lender.