Home Loan Calculator Monthly Payment: Formula and Example

A home loan calculator estimates your monthly principal-and-interest payment from the loan amount, annual interest rate, and repayment term. Enter those three figures to see the monthly payment and total interest; the result does not include property taxes, homeowners insurance, or other housing costs.

Formula

For a fixed-rate loan with equal monthly payments, the payment is calculated as:

M = P × r ÷ [1 − (1 + r)⁻ⁿ]

• M is the monthly principal-and-interest payment, in dollars.
• P is the amount borrowed, in dollars.
• r is the monthly interest rate as a decimal: annual APR ÷ 1,200. For example, 8% gives 0.08 ÷ 12, or about 0.006667 per month.
• n is the number of monthly payments: the loan term in years × 12.

The calculator’s first result is the monthly payment. Its second result estimates total interest by multiplying that payment by the number of months and subtracting the original principal. Because the displayed payment is rounded to cents, the total-interest estimate uses that rounded payment too. The formula assumes a positive APR, so the rate input starts at 0.01%.

Worked Example

Using the calculator’s default values—$20,000 borrowed, an 8% APR, and a five-year term—there are 5 × 12 = 60 monthly payments. The monthly rate is 8 ÷ 1,200 = 0.0066667.

M = 20,000 × 0.0066667 ÷ [1 − (1 + 0.0066667)⁻⁶⁰]

The payment is approximately $405.53 per month when rounded to cents. Over 60 months, the rounded payments total $405.53 × 60 = $24,331.80. Subtracting the $20,000 principal gives estimated total interest of $4,331.80.

Assumptions

• The interest rate is fixed for the full term.
• Payments are equal, made monthly, and paid at the end of each monthly period.
• Interest is compounded monthly using APR ÷ 12.
• The calculation excludes fees, taxes, homeowners insurance, mortgage insurance (PMI), escrow, and any other costs because they are not inputs.

What the Monthly Payment Includes

This calculator gives the scheduled payment for repaying principal and interest, often shortened to P&I. Principal reduces the outstanding amount borrowed; interest is the charge calculated on the remaining balance. In a standard fixed-rate, fully amortizing loan, the payment stays level, but its composition changes: early payments generally devote a larger share to interest, while later payments devote more to principal.

A home’s actual monthly housing outlay can be different from this result. Property taxes, homeowners insurance, mortgage insurance where applicable, association charges, and maintenance are separate from principal and interest. Some loan statements combine certain charges with the loan payment through escrow, but this calculator does not estimate escrow or those charges. Use separate figures from relevant documents or service providers when building a broader budget; this result alone does not show what a household can afford or whether an application will be approved.

How to Use the Estimate

1. Enter the amount you expect to borrow, not the home’s full purchase price. A down payment reduces the amount financed, though this calculator does not model a down payment directly.
2. Enter the annual APR as a percentage, such as 6.5 for 6.5%, rather than entering 0.065. Use the rate and loan amount supplied for the scenario you want to examine; obtain actual figures from the lender.
3. Enter the repayment term in years. The calculator converts it to months by multiplying by 12.
4. Read the monthly payment as estimated P&I, then check total interest as an estimate over the full scheduled term.

For example, if you know a property price and a proposed down payment, subtract the down payment to get a simplified starting loan amount. The actual amount financed can also reflect financed charges or other details, so use the lender’s stated loan amount when available.

Common Errors and Limits

• Confusing APR and the monthly rate: the input is an annual percentage. The formula divides it by 1,200 to convert percent per year to a monthly decimal rate.
• Using the purchase price as the loan amount: the calculator needs the amount borrowed. Those figures differ when a down payment or other financing adjustments apply.
• Treating P&I as the entire housing payment: taxes, insurance, escrow, and other ownership costs are not included.
• Assuming every loan has level payments: the formula does not model a variable rate, interest-only period, balloon payment, skipped payments, or extra principal payments.
• Overinterpreting cents or total interest: actual payment schedules may have a slightly different final payment because of rounding, payment dates, servicing conventions, or loan-specific terms.

The formula is useful for a straightforward fixed-rate amortizing loan, but it cannot reproduce a complete lender disclosure without the contract’s exact terms and all charges. For adjustable-rate loans, the payment may change when the rate resets; this calculator holds the entered rate constant. Extra payments can also alter the payoff path and total interest, and are not represented here.

Frequently Asked Questions

How do I calculate a home loan payment?
Convert the annual APR to a monthly decimal by dividing it by 1,200, and convert the term to months. Apply the fixed-payment formula shown above using the amount borrowed, monthly rate, and number of payments.

Does this monthly payment include taxes and insurance?
No. It estimates principal and interest only. Property taxes, homeowners insurance, mortgage insurance, escrow, and other costs must be considered separately.

Why does more of an early payment go to interest?
Interest for each period is calculated on the outstanding balance. That balance is largest near the beginning of repayment, so the interest portion is generally larger then; as principal is repaid, the interest portion declines.

Should I enter APR or the monthly interest rate?
Enter the annual APR as a percentage, such as 8 for 8%. The calculator performs the monthly conversion internally. Do not enter 8 divided by 12 or 0.08 as the APR input.

Is this the exact payment a lender will charge?
Not necessarily. The calculation leaves out charges and loan-specific terms, and rounding or payment timing may affect the final schedule. Check the lender’s disclosure for the figures that apply to a specific loan.

This result is an estimate, and the lender’s disclosure gives the exact figures.

Related

• Mortgage Calculator With Escrow: Payment With Tax and Insurance
• Mortgage Loan Amount Calculator: The Loan a Monthly Payment Repays
• Home Equity Loan Calculator: Amount Up to a CLTV Limit and Payment

in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2