How to Calculate Your Mortgage Payment

You've found your dream home, negotiated a price, and you're ready to make an offer. But there's one crucial question keeping you up at night: "Can I actually afford the monthly payments?" If you're feeling overwhelmed by mortgage calculations, you're not alone. Most first-time homebuyers find mortgage math confusing—but it doesn't have to be.

Understanding how to calculate your mortgage payment is one of the most important financial skills you'll develop as a homebuyer. It's not just about knowing what you'll owe each month—it's about making informed decisions that protect your financial future. Let's break down everything you need to know, step by step.

What Actually Goes Into Your Monthly Mortgage Payment?

Here's where most people get confused: your mortgage payment isn't just paying back the loan. There are typically four main components, often called PITI:

But wait—there's often a fifth component: PMI (Private Mortgage Insurance). If you're putting down less than 20% on a conventional loan, you'll pay PMI until you reach 20% equity. This can add anywhere from $100 to $300+ to your monthly payment, so it's definitely not something to overlook.

The Basic Mortgage Payment Formula

The core of your mortgage payment—principal and interest—is calculated using this formula:

Don't panic if math isn't your thing! That's exactly why we created our free mortgage calculator. But understanding the formula helps you see what factors actually affect your payment.

A Real-World Example

Let's say you're buying a $350,000 home with a 10% down payment ($35,000). Here's how your numbers might look:

Factors That Impact Your Mortgage Payment

1. Your Down Payment

This is huge. Every dollar you put down is a dollar you don't have to borrow. Plus, hitting that 20% threshold eliminates PMI completely. In our example above, if you could put down 20% ($70,000), you'd save $175/month on PMI—that's $2,100 per year!

2. Interest Rate

Even small changes in interest rates make a big difference. A 6.5% rate versus a 7% rate on a $315,000 loan means about $100 more per month. Over 30 years, that's $36,000! This is why it's crucial to shop around for the best rate and consider buying points if you plan to stay in the home long-term.

3. Loan Term (15 vs. 30 Years)

A 15-year mortgage has higher monthly payments but dramatically lower total interest. Using our example, a 15-year loan at 6% would cost about $2,660/month in principal and interest—only slightly more than the 30-year option—but you'd save over $200,000 in interest and own your home in half the time.

Common Mistakes First-Time Buyers Make

How Much House Can You Really Afford?

Here's a rule of thumb that's served many homebuyers well: your total monthly housing payment (PITI + HOA) shouldn't exceed 28% of your gross monthly income. If you make $6,000/month, that's $1,680 for housing.

But honestly? Just because you qualify for a certain amount doesn't mean you should borrow it. Think about your lifestyle, other goals (retirement, travel, kids' education), and what feels comfortable for your situation.

Use a Mortgage Calculator to Explore Your Options

The best way to understand your mortgage payment is to play with the numbers. Our mortgage calculator lets you:

• Adjust down payment amounts to see PMI impact
• Compare 15-year vs. 30-year terms side by side
• See how interest rates affect your payment
• Include taxes, insurance, and HOA fees for complete picture
• View amortization schedules to see principal vs. interest breakdown

Final Thoughts

Buying a home is probably the biggest financial decision you'll make, and understanding your mortgage payment is the foundation of that decision. Take your time, run the numbers, and don't hesitate to ask questions. Every good lender will be happy to walk you through calculations and options.

Remember: the goal isn't just to buy a house—it's to buy one you can comfortably afford while still living your life and working toward other financial goals. Use calculators, do your research, and make an informed decision that sets you up for long-term success.

Happy house hunting!