The Mortgage Strategy Guide
A mortgage is likely the largest financial contract you will ever sign. Use this guide to navigate the 2026 debt market with clinical precision.
Monthly Payment Formula
Principal & Interest (P&I)
- Scope & Limits:Standard P&I formula for fixed-rate amortized loans. Does not include property taxes, insurance, or PMI. All calculations run in your browser; no data is sent to servers. Verify with a qualified professional before committing to a mortgage.
The monthly payment for a fully amortized loan is:
where P = principal, i = monthly interest rate (annual rate รท 12), n = total number of payments. Early payments are mostly interest; later payments shift to principal.
Validation Checklist
Validate with Affordability:
Before committing to this payment, use our House Affordability Calculator. A bank may approve you for a DTI of 45%, but our conservative model suggests keeping housing under 28% of gross income to maintain lifestyle flexibility.
Check vs. Renting:
In high-rate environments, renting often results in a higher net worth due to the opportunity cost of the down payment. Run your scenario through the Rent vs. Buy Simulator to ensure this debt is the right move for your 10-year plan.
Mortgage Cost FAQ
? What is the monthly payment on a $400,000 mortgage?
At a 7% interest rate over 30 years, a $400,000 mortgage has a principal and interest payment of approximately $2,661/month. Add property taxes, homeowners insurance, and PMI (if applicable) for your true monthly cost. Use the calculator above with your exact rate and term for a precise figure.
? What does a mortgage payment include?
A full mortgage payment typically has four components โ principal, interest, property taxes, and homeowners insurance, often called PITI. If your down payment is under 20%, PMI is added as a fifth component. The calculator covers principal and interest; factor in your local tax and insurance estimates for a complete picture.
? How does interest rate affect my monthly payment?
Rate is the biggest single lever. On a $400,000 30-year loan, the difference between 6% and 7% is roughly $240/month โ and over $86,000 in total interest. Even a 0.5% improvement is worth shopping for across multiple lenders.
? What is an amortization schedule?
An amortization schedule shows every payment broken into principal and interest over the life of the loan. Early payments are mostly interest; later payments shift heavily toward principal. The schedule lets you see exactly how much equity you build each year.
? How much do I need for a down payment?
The conventional minimum is 3โ5% for most loan programs, though 20% avoids PMI. FHA loans allow 3.5% down. A larger down payment reduces your loan balance, lowers your monthly payment, and reduces total interest paid โ the calculator lets you compare scenarios side by side.
? What is PMI and how does it affect my payment?
Private Mortgage Insurance protects the lender if you default, and is typically required when your down payment is below 20%. PMI usually costs 0.5โ1.5% of the loan amount annually, added to your monthly payment. It cancels automatically once your loan-to-value ratio reaches 78%.
? What is the difference between a 15-year and 30-year mortgage?
A 15-year mortgage carries a lower interest rate but a significantly higher monthly payment. On a $400,000 loan, you might pay $3,500/month at 6.5% vs. $2,528/month at 7% on a 30-year โ but save over $200,000 in interest. The right choice depends on your cash flow and financial goals.
? How is mortgage interest calculated?
Mortgage interest is calculated monthly on your remaining balance. Each month: remaining balance ร (annual rate รท 12) = interest due. The rest of your payment reduces principal. As principal falls, the interest portion shrinks โ which is why extra payments early in the loan have an outsized impact.
? How much house can I afford?
A common guideline is that total housing costs (PITI) should not exceed 28% of gross monthly income, and total debt payments should stay under 43% (the DTI limit most lenders use). Use the monthly payment result from this calculator alongside your income to check both thresholds before applying.