How Mortgage Payments Work
Your monthly mortgage payment is determined by three factors: the loan amount (principal), the interest rate, and the loan term. Each payment is split between paying down principal and paying interest to the lender. Early in the loan, most of each payment goes toward interest; over time, more goes toward principal.
The Mortgage Payment Formula
Where:
M = Monthly payment
P = Principal loan amount
r = Monthly interest rate (annual rate / 12)
n = Total number of payments (years x 12)
Frequently Asked Questions
How does the interest rate affect my payment?â–¾
Even small changes in interest rate have a significant impact. For example, on a $300,000 loan, the difference between 6% and 7% is about $200/month -- and over 30 years, that adds up to over $70,000 in additional interest.
Should I choose a 15-year or 30-year mortgage?â–¾
A 15-year mortgage has higher monthly payments but a lower interest rate and dramatically less total interest paid. A 30-year mortgage offers more affordable monthly payments but costs significantly more over the life of the loan. Choose based on your monthly budget and financial goals.
Does this calculator include taxes and insurance?â–¾
This calculator shows principal and interest only. For a complete picture including property taxes, homeowner's insurance, PMI, and HOA fees, use our full Affordability Calculator.
Can I make extra payments to pay off my mortgage faster?â–¾
Yes. Making extra principal payments can dramatically reduce your total interest and shorten your loan term. Even one extra payment per year on a 30-year mortgage can shave off about 4-5 years and save tens of thousands in interest.
Calclypso Editorial Team
Reviewed by certified financial professionals. Last updated: April 2026. Our mortgage calculator uses standard amortization methodology used by Fannie Mae and Freddie Mac.