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Monthly principal-and-interest formula
A standard fixed-rate mortgage payment uses the loan amount, monthly interest rate and total number of monthly payments.
Payment = P × r(1+r)^n ÷ ((1+r)^n − 1)
Worked example
For P = $250,000, annual rate = 6%, monthly rate = 0.005 and n = 360, principal and interest is about $1,499 per month.
Taxes and insurance are separate
The example covers principal and interest only. Property taxes, homeowners insurance, association dues and mortgage insurance can raise the total monthly housing cost.
Common mistakes
- Using 6 instead of 0.06 as the annual rate.
- Using the annual rate directly instead of a monthly rate.
- Assuming principal and interest equals the full housing payment.
Frequently asked questions
What is the payment on $250,000 at 6% for 30 years?
About $1,499 per month for principal and interest.
Does that include property tax?
No.
What if the term is 15 years?
The monthly payment would be higher, but total interest would usually be lower.