How to Calculate a Mortgage Payment (with Formula)
Learn the exact formula behind monthly mortgage payments, walk through a worked example, and see how rate and term change what you pay.
A mortgage payment can feel mysterious until you see the formula it comes from. Once you know how the numbers connect, choosing a term, comparing offers, and deciding whether to pay extra becomes much simpler.
The formula
M = P · r(1+r)^n / ((1+r)^n − 1)
- P is the amount you borrow (the principal).
- r is the monthly interest rate — the APR divided by 12.
- n is the total number of monthly payments (years × 12).
A worked example
Say you borrow $300,000 at 6.5% APR for 30 years. Plug in the numbers: r = 0.065 / 12 ≈ 0.00542 and n = 360. The monthly payment works out to about $1,896.20. Over 30 years you'll pay roughly $682,000 in total — more than double the original loan.
Why term matters more than you think
Shortening the term from 30 to 15 years increases the monthly payment but drops total interest dramatically. The same $300,000 at 6.5% over 15 years costs about $2,614 per month but only ~$170,500 in interest — a savings of over $200,000.
Try it yourself
Use the Mortgage Calculator to explore different rates and terms with your own numbers.