How it works
The monthly principal & interest payment uses the standard amortizing-loan formula:
M = P × [ r(1 + r)n ] / [ (1 + r)n − 1 ]
- M = monthly principal & interest payment
- P = loan amount (home price − down payment)
- r = monthly interest rate (annual rate ÷ 12)
- n = number of payments (years × 12)
Monthly property tax, homeowners insurance and HOA are added on top of M to get your total monthly housing payment.
Worked example
On a $400,000 home with 20% down ($80,000), a 30-year loan at 6.5%:
- Loan amount P = $320,000
- Monthly rate r = 0.065 / 12 = 0.005417
- Payments n = 360
- Principal & interest M ≈ $2,022/mo
- Total interest over 30 years ≈ $408,142