People type this into search every day: how is a mortgage payment calculated.
The usual answer is “the lender figures it out.” The CFPB already published how they do it.
Principal and interest come from three numbers
The CFPB’s note on how lenders calculate monthly payments says a typical fixed-rate mortgage uses a standard formula. The payment depends on the loan amount, the interest rate, and the term. Keep the loan for the full term and make every payment, and the balance hits zero on the last one.
That scheduled piece is principal and interest only, so the total you send is often higher once tax and insurance land in escrow.
The mortgage payment calculator uses this formula:
P × r(1+r)ⁿ ÷ ((1+r)ⁿ − 1)
P is the loan amount. r is the annual rate divided by 12. n is the number of months.
If the rate were 0%, the payment would be P ÷ n. A real mortgage adds the r terms so each month can cover that month’s interest and still finish on schedule.
What the defaults look like
Here are the calculator defaults:
- home price: $420,000
- down payment: $84,000
- annual rate: 6.25%
- term: 30 years
Loan amount: 420000 − 84000 = $336,000
Monthly rate: 0.0625 ÷ 12 = 0.00520833…
Months: 30 × 12 = 360
Monthly principal and interest: $2,068.81
Total of payments: 2068.81 × 360 = $744,771.53
Total interest: 744771.53 − 336000 = $408,771.53
The interest, $408,771.53, is larger than the $336,000 you borrowed. That is the cost of spreading the loan over 360 months at 6.25%.
The CFPB walks through a smaller case on the same page. A $100,000 loan for 30 years at 4% is $477 a month. Same formula, rounded to the nearest dollar. The unrounded payment is $477.42.
Most of the early payment is interest
The CFPB’s amortization explainer says the combined principal and interest payment stays the same, while the split between interest and principal changes.
In the beginning the balance is high, so most of the payment covers interest. Later the balance is lower, so more of the same payment cuts principal.
Month 1 interest: 336000 × (0.0625 ÷ 12) = $1,750.00
The $2,068.81 payment covers that $1,750.00. The leftover $318.81 is the first cut to principal. After that month the balance is $335,681.19.
At month 180, halfway through the calendar, interest is $1,260.89 and principal is $807.92. The balance is still $241,282.32, which is 71.8% of the original $336,000.
By month 360 the split has reversed. Interest is $10.72. The rest clears the $2,058.09 that is left.
The loan amortization schedule calculator is the same monthly loop on any fixed loan. It adds that month’s interest, subtracts the payment, and repeats.
The amount you send is usually larger
The CFPB calls the four pieces PITI: principal, interest, taxes, and insurance. Their PITI note is short. Principal and interest repay the loan. Taxes and homeowners insurance often sit in escrow until those bills come due.
Their longer note on the total monthly payment writes it as:
principal + interest + mortgage insurance (if you have it) + escrow (tax and insurance) = total monthly payment
Condo, co-op, and HOA fees are usually paid separately.
The calculator excludes property tax, insurance, fees, and mortgage insurance. The $2,068.81 is the comparable principal-and-interest figure, so you still have to add those other costs when you compare listings.
If one lender escrows tax and insurance and another does not, the CFPB says to compare the principal and interest lines. Then add tax and insurance yourself so the totals match.
A shorter term raises the payment and cuts the interest
Keep the $336,000 and 6.25%. Change only the term to 15 years.
Monthly payment: $2,880.94
Total interest: $182,569.35
That is $812.13 more each month than the 30-year payment. It also drops the interest by $226,202.18.
The CFPB’s balloon example is the opposite setup. Payments are sized as if the loan lasted 30 years. The term is much shorter, often five. After those five years you still owe a large final payment. In their $100,000 at 4% case, that leftover is $90,448.
A higher rate raises both the payment and the interest
Freddie Mac’s Primary Mortgage Market Survey for the week of October 8, 2026 puts the 30-year fixed average at 7.40%. The 15-year average is 6.73%. Those are national averages from purchase applications, not a quote for one borrower.
Put that 7.40% on the same $336,000, 30-year loan.
Monthly principal and interest: $2,326.40
Total interest: $501,502.61
That is $257.59 more per month than the 6.25% default, and $92,731.08 more interest over the full term.
Extra principal shortens the remaining term
The CFPB’s servicer rules page says you may be allowed to send extra money toward principal. Check that the servicer applies it to principal, not to the next interest charge. They note that even $100 more a month may cut several years off the term.
The mortgage extra payment calculator compares the scheduled payment with the same payment plus a fixed extra.
Here are those defaults:
- remaining balance: $320,000
- rate: 6%
- remaining term: 28 years
- extra: $250
Scheduled payment: $1,968.40
Add $250 and the new payment is $2,218.40. Payoff time drops to 21 years 5 months. Time saved: 6 years 7 months. Interest saved: $93,204.72.
A prepayment penalty is a fee for paying off all or part of the loan early. The CFPB says it usually applies when you pay the whole balance, for example after a sale or a refinance, in the first few years. Small extra principal payments usually do not trigger it, but the fee is in the note if your loan has one.
Open the mortgage payment calculator with the price, the cash you can put down, the rate on the Loan Estimate, and the term you were offered. Treat that result as principal and interest. Then add tax, insurance, and any mortgage insurance before you call it the monthly cost.