When it comes to your monthly mortgage payment, you're not just paying off the sticker price of the home. Your payment typically covers the principal and interest, taxes, and insurance -- together known as PITI -- plus a few other costs. It's easy to forget some of these costs when budgeting for a mortgage, which can lead to surprises.
"It's always a good idea to know how to calculate a mortgage payment on your own," says Mark Zihmer, originating manager at mortgage lender Guaranteed Rate Affinity. "It helps you determine if you can afford a payment on the fly."
To calculate your mortgage payment, first gather a few details about the home and loan. Then you can use a free online mortgage payment calculator or spreadsheet program to run the calculations -- or crunch the numbers by hand. Here's how to do the math on a mortgage payment.
How Is PITI Calculated?
PITI is calculated by adding together your principal, interest, taxes and insurance. While the principal and interest are set over the course of a fixed-rate loan, "the payment will vary when you start adding in other factors such as taxes, a homeowners association fee, homeowners insurance, mortgage insurance and maintenance on the home," says Trent Davis, real estate broker associate with Coldwell Banker Residential Real Estate -- Florida.
However, you can still estimate each of these elements when calculating your mortgage payment:
Principal. This is "the true amount you've taken out, or the price of the house minus the down payment," Davis says. For example, if you buy a house priced at $200,000 and you make a 20% down payment, then your principal is $160,000 at the start of the loan term.
Interest. This is what the bank charges you to borrow money. Your lender will provide you with an interest rate when you get preapproved for a mortgage or apply for the loan. The total principal and interest won't change over time on a fixed-rate loan, but the interest may increase or decrease if you have an adjustable-rate mortgage.
Taxes. State and local governments can levy real estate or property taxes, which typically help pay for schools, police, parks and other community services. The amount you pay is usually based on the value of your home, so the portion that goes toward taxes may fluctuate each year as your home value increases or declines. To estimate this payment, call your local government tax agency or your lender and provide the address of the home.
Insurance. Homeowners insurance protects the home and its contents from natural disasters, liabilities, theft and other troubles, but "the payment is not one-glove-fits-all," Davis says. "You can make premiums higher and deductibles lower or vice versa. It depends on how much coverage you want and the discounts you can take advantage of."
Shop around for homeowners insurance so you can estimate this portion of the mortgage payment. To get an accurate quote, you'll need the home's address and some information about its structure and size.
[Read: Best Mortgage Lenders.]
What Else Should You Estimate in a Mortgage Payment?
There's more to a mortgage payment than just PITI. Here's what else you could be on the hook for:
Homeowners association fee. If you live in a condo or neighborhood with an association, you may be required to join the association and pay dues. Ask the seller about this monthly fee, which usually pays for common areas and amenities, such as a fitness center, pool, landscaping and parking lots. While you'll typically pay this fee directly to the association -- not your mortgage servicer -- this is considered part of your monthly mortgage payment.
Private mortgage insurance. If you put down less than 20% of the home's selling price at closing, then the lender will typically require you to pay mortgage insurance. This cost is baked into your monthly mortgage payment and protects the lender in case you default on the home loan. The lender will estimate your PMI based on the price of the home and your down payment, but expect to pay between $30 and $70 per month for every $100,000 borrowed.
Once the equity in your home reaches 20%, you can usually ask the bank to remove the PMI payment. However, some loans, such as Federal Housing Administration loans, have different guidelines.
Home maintenance and emergencies. Certain costs won't go into your mortgage payment but are important to factor into your budget when calculating home costs. For example, you'll need to consider whether you need to hire a landscaper (or buy lawn care equipment), estimate the utility bills and budget for appliances that will need to be replaced.
"Consider the age of the home," Zihmer says. "When was the last time the property had any maintenance for major items like the roof or air conditioning?"
It's also smart to have an emergency savings account for home repairs and insurance deductibles. "When you own a house, there's always a risk something will go wrong," Davis says.
[Read: Best Mortgage Refinance Lenders.]
How Can You Estimate Your Mortgage Payment?
Using the PITI and other main housing costs, you can choose an online monthly mortgage payment calculator and plug in the numbers. Or you can dive into the math yourself. Here's how to calculate a mortgage payment using two methods:
Calculate monthly mortgage payments in Excel. Spreadsheet programs, such as Excel and Google Sheets, include a payment function that can calculate the principal and interest on a mortgage. Let's say you buy a condo priced at $150,000. You make a down payment of 10% (or $15,000) on a 30-year fixed-rate mortgage with a 4% interest rate.
Here's how to calculate monthly mortgage payments in Excel:
In the spreadsheet, type in "=PMT" to prompt the payment function. The program will ask you to type in the following variables:
-- Rate. This is your monthly interest, which is the rate divided by 12 months. In this example, the interest is 4%, or 0.003333 each month.
-- Number of payments, or "nper." This is the number of payments you'll make over the life of the loan. A 30-year loan has payments spread over 360 months.
-- Present value, or "pv." This is the principal loan amount. In this example, you're borrowing $135,000.
-- You can ignore the other values for this example. Press "enter" to get your monthly principal and interest payment, which is $644.48.
Of course, the principal and interest are only a portion of what you'll pay every month. Add a table to your spreadsheet and enter your estimated monthly costs, which you've gathered from various sources.
Here's how those costs break down:
Where to Get This Cost
Principal and interest (rounded up)
Calculate with spreadsheet formula
Request from local tax agency or lender
Insurance (homeowners insurance)
Gather quotes from various insurers and choose the best one
Insurance (private mortgage insurance)
Request from lender
Homeowners association fee
Request from seller or HOA
Total mortgage payment
You may also choose to include your ongoing maintenance costs and emergency home savings for a more complete picture of your housing costs.
Calculate monthly mortgage payments by hand. It's also possible to estimate a mortgage payment by hand. Use the following formula to find the principal and interest:
M = P[r(1+r)^n/((1+r)^n)-1)]
M = the monthly mortgage payment, which is the number you want to find
P = the principal loan amount, or $135,000
r = your monthly interest rate, or 0.003333
n = number of monthly payments, or 360
Here's the formula with those numbers plugged in:
M = $135,000[0.003333(1+0.003333)^360/((1+0.003333)^360)-1]
M = $135,000[0.00477392237]
M = $644.48
[Read: Best FHA Loans.]
How Can You Calculate Your Amortization Schedule?
Your mortgage payment is important, but you'll also want to know how much interest you pay over the life of the loan. Your lender will give you an amortization schedule at closing, but you can also use a spreadsheet program to create one.
Here's how to calculate your amortization schedule on the first six months of the loan term:
-- Open a spreadsheet and label cells A1 through A3 as: Loan amount, Interest rate and Payments. Type in the information for cells B1 through B3: $135,000 for the loan amount, .04 for the interest rate, and $644.48 for the monthly principal and interest payment.
-- Then label the columns from cell A4 across through F4: Period, Beginning balance, Payment, Principal, Interest and Ending balance.
-- In cells A5 through A10, enter the month and year of the first six loan payments, starting with 1/1/20 and ending in 6/1/20.
-- Use the following formulas in their respective cells (the dollar sign helps the formula find the appropriate cell):
-- Beginning balance (cell B5): "=$B$1"
-- Payment (cell C5): "=$B$3"
-- Interest (cell E5): "=$B5*($B$2/12)"
-- Principal (cell D5): "=$C5-$E5"
-- Ending balance (cell F5): "=$B5-$D5"
-- B6: "=$F5"
-- Copy cells C5, D5, E5 and F5 and paste them into C6, D6, E6 and F6.
-- Highlight cells B6 through F6, and drag them down to row 10.
When you're done, you'll know how to calculate the principal and interest on a home loan, create an amortization schedule and estimate the other items that go into your monthly housing costs. However, Zihmer says, "People can make mistakes, so it's best to at least double-check the numbers with a mortgage professional."
While lenders may preapprove you for a certain home loan amount, these calculations can help you understand what you can afford and create a realistic budget before you start checking out homes.