Formula & method
Monthly payment M = P × r(1+r)^n ÷ ((1+r)^n − 1), where P is the loan amount, r the monthly interest rate and n the number of payments.
Worked example
A $300,000 loan at 6.5% for 30 years gives a principal-and-interest payment of about $1,896.20 per month. In month 1, $1,625.00 goes to interest and $271.20 to principal.
FAQ
- What does PMI do to the payment?
- PMI (private mortgage insurance) is added while your equity is below 20% of the home value. Add it as a monthly amount to see the full payment.
- Should I include taxes and insurance?
- Yes, if you want the real monthly outlay. Lenders usually collect them monthly into escrow.
- Does a bigger down payment help?
- Yes: it lowers the loan amount, the monthly payment, and can remove PMI once you reach 20% equity.
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