Mortgage Payment Formula Explained
The math behind the Mortgage Payment Calculator: the equation, the 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) — from a home price, down payment, rate, and term.
The Formula
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.
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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.