You found the house: $350,000, and you have 10% saved for a down payment. The listing looks affordable until you ask the question every buyer eventually asks: what does this actually cost me each month? The answer is not just the price divided by the years. Interest does most of the heavy lifting early on, and a single percentage point on the rate can move your payment by hundreds of dollars. This calculator turns price, down payment, rate, and term into the monthly number your budget has to live with.
The formula it runs on
Formula: M = P[r(1+r)^n] / [(1+r)^n - 1]
P is the loan amount, which is the home price minus your down payment. r is the monthly interest rate, the annual rate divided by 12. n is the total number of monthly payments, 360 for a 30-year mortgage. The formula finds the fixed payment M that exactly pays off the loan after n payments, with early payments going mostly to interest and later ones mostly to principal. It applies to fixed-rate mortgages with equal monthly payments.
How to use the calculator
- Enter the home price.
- Enter your down payment, as an amount or a percentage.
- Enter the annual interest rate and the loan term in years.
- Read the monthly payment of principal and interest, plus the total interest over the loan's life.
- Try different down payments and terms to see the trade-offs.
Worked example, step by step
Home price $350,000, 10% down, 7% rate, 30 years. Step one: the loan is 350,000 - 35,000 = $315,000. Step two: r = 0.07 / 12 = 0.0058333, n = 360. Step three: 1.0058333^360 = 8.11343. Step four: M = 315,000 x [0.0058333 x 8.11343] / [8.11343 - 1] = 315,000 x 0.0473284 / 7.11343 = 315,000 x 0.00665302 = $2,095.70 per month. Over 30 years that totals $754,452, meaning $439,452 is interest. Now try 20% down instead: the loan drops to $280,000 and the payment becomes 280,000 x 0.00665302 = $1,862.85, saving $232.85 every month. That is the down payment's real leverage, made visible.
Practical uses beyond the headline number
Affordability checks come first: lenders often want housing costs under a share of income, and this gives you the core figure. Comparing a 15-year and 30-year term shows the classic trade: much higher payment, dramatically less total interest. When refinancing, run the current loan and the new offer side by side to see whether the savings survive the closing costs. The amortization calculator breaks any of these payments into its month-by-month schedule, the APR calculator folds lender fees into the comparison, and APY helps you weigh where to park the down payment while you save.
Common mistakes
- Forgetting taxes, insurance, and HOA. This formula gives principal and interest only. The real monthly check includes property tax, homeowner's insurance, and any HOA dues.
- Using the annual rate as r. The formula needs the monthly rate. Dividing the annual rate by 12 is a small step that changes everything.
- Ignoring adjustable rates. The math assumes a fixed rate. With an ARM, the payment recalculates when the rate adjusts.
An honest note on limits
This is principal and interest for a fixed-rate loan only. Real ownership costs include taxes, insurance, maintenance, and closing costs, and rates and approval depend on credit and lender terms. Use the result as a planning estimate, not financial advice.