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To compare monthly mortgage payments at different interest rates, keep the loan amount and term the same, then calculate principal and interest (P&I) for each rate. For a fixed-rate, fully amortizing loan, use the monthly payment formula below. The result is P&I only—not necessarily the full amount you will pay for housing each month.
What you need to calculate the payment
The standard formula applies to a fixed-rate loan that is fully amortized over its term: scheduled monthly payments cover principal and interest so the balance reaches zero at the end, assuming you make every payment as scheduled. The Consumer Financial Protection Bureau (CFPB) identifies the amount borrowed, interest rate, and loan term as the key inputs.
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- P = principal borrowed, or the loan amount—not automatically the home’s purchase price.
- i = annual nominal interest rate written as a decimal. For example, 6% is 0.06.
- r = monthly interest rate, calculated as
i / 12. - n = total number of monthly payments, calculated as years in the term multiplied by 12.
For a positive interest rate, the monthly P&I payment is:
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If the interest rate is zero, divide the principal by the number of payments: M = P / n. For the formula and the assumptions behind scheduled payments, see the CFPB’s mortgage payment explanation.
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How to compare interest rates fairly
- Set the loan amount. Use the amount financed. If you start with a home price, account for the down payment to find the loan amount.
- Set the term. Convert the term to months. A 30-year loan has 360 scheduled monthly payments.
- Convert each annual rate. Write each rate as a decimal and divide by 12 to get the monthly rate.
- Calculate each payment. Use the same loan amount and number of payments in every scenario; change only the interest rate.
- Label the result P&I. Keep taxes, insurance, mortgage insurance, and dues separate unless you are deliberately estimating the total monthly cost for every scenario.
This isolates the rate’s effect. It does not make the rates offers available to a particular borrower: actual loan pricing can depend on borrower eligibility, property, location, fees, and points.
Worked example: the same loan at 4% and 5%
The CFPB’s archived example compares a $200,000 loan over 30 years: monthly P&I is $955 at 4% and $1,074 at 5%. The amount borrowed and term stay constant, so the difference illustrates the effect of changing the rate alone.
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| Loan amount | Term | Annual interest rate | Monthly P&I |
|---|---|---|---|
| $200,000 | 30 years (360 payments) | 4% | $955 |
| $200,000 | 30 years (360 payments) | 5% | $1,074 |
These are illustrative figures from an archived CFPB article, not current mortgage-rate offers or a quote for a specific borrower. The source’s calculator warning notes that estimates may omit property taxes, homeowners insurance, mortgage insurance, and condo or HOA dues. See the CFPB’s archived homeownership-cost guidance.
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1Scan for outdated or missing drivers - takes under a minute2Repair Windows errors before they cause bigger problems3Fix the driver behind crashes, sound loss and screen glitchesFor another check on the arithmetic, the CFPB gives a $477 monthly P&I payment for $100,000 borrowed over 30 years at 4%. A separate Freddie Mac illustration shows that a $135,000, 30-year loan at 4.5% has a $684.03 monthly payment. In that example’s first month, $506.25 goes to interest and $177.78 to principal, leaving a balance of $134,822.22. The payment is level in a fixed-rate example, but its principal-and-interest split changes as the balance falls. Freddie Mac’s fixed-rate mortgage calculator includes an amortization view.
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Why P&I may not match your monthly housing cost
A mortgage payment estimate often means P&I, but the amount sent to a servicer may also include mortgage insurance and escrow for property taxes and homeowners insurance. People often refer to principal, interest, taxes, and insurance together as PITI. HOA or condo dues are often paid separately. Taxes and insurance can change over time, changing an escrow-inclusive payment even when fixed-rate P&I remains level.
When reviewing an offer, use the Loan Estimate’s projected payments and check which costs are included or paid separately. Compare like with like: do not compare one lender’s escrow-inclusive total with another lender’s P&I alone. The CFPB’s Loan Estimate guide explains how to review projected payments. For a budget estimate, use a realistic rate assumption rather than assuming an advertised rate will match your offer; the CFPB’s home-buying preparation guidance points readers to mortgage calculators and budgeting considerations.
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- SPEAKS YOUR LANGUAGE: Keys clearly labeled in residential mortgage finance terms like Loan Amt, Int, Term, Pmt; this industry-standard calculator is super easy to use on all realty financing matters from finding a loan that works for your client to considering trust deeds investments, or finding remaining balances or balloon payments and more
- CONFIDENTLY AND EASILY SOLVE: Clients' financial questions whether they're buyers, sellers, investors or renters. Increase your perceived professionalism as a new agent, experienced broker or seasoned loan officer. Close more home sales and impress your clients with fast, accurate answers to all their real estate finance questions from PITI Payments to IRR, NPV and Cashflows
- DEDICATED BUYER QUALIFYING KEYS: Enter client's income, debt and expenses to pre-qualify them to only show properties they can afford. Include tax, insurance and mortgage insurance then compare loan options and payment solutions to give your client choices before they make an offer to buy
- FIGURE OUT THE RIGHT LOAN: For your client at the press of a button for jumbo, conventional, FHA/VA, or even 80:10:10 or 80:15:5 combo loans; check to see if ARMs or bi-weekly loans, quarterly payments or if interest-only payments are the answer; giving your client more choices; easily perform what if loan or TVM calculations find loan amount, term, interest or PITI or PI payments
- BECOME AN INVALUABLE RESOURCE: To your clients by reducing their confusion and uncertainty; ensuring they are able to make a purchase offer; knowing they can afford the down payment; and determining which is the right loan for them. Date-math for listings and contracts too. Comes with a protective slide cover, quick reference guide, pocket user's guide, and long-life battery
When this formula does not describe the whole loan
Fixed-rate, fully amortizing mortgage
This is the case the formula is designed for. The scheduled P&I amount is generally level, while the portion applied to interest falls and the portion applied to principal rises as the loan balance declines. The CFPB explains how principal payments reduce the amount owed in its guide to paying down a mortgage.
Adjustable-rate mortgage
An adjustable-rate mortgage (ARM) can change after its initial period. The initial payment is generally calculated as if the starting rate continued for the full term; after a rate adjustment, the payment is usually recalculated using the new rate and remaining term. The loan contract’s adjustment schedule and limits determine what can happen, so a single fixed-rate scenario is not a forecast of later ARM payments. See the CFPB’s ARM explanation.
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Balloon loan
A balloon loan can use payments based on a longer amortization schedule than its actual term, leaving a large balance due at the end. In the CFPB’s example, a five-year balloon loan has payments calculated on a 30-year schedule and $90,448 due at the end of year five. That is not a conventional, fully amortizing 30-year comparison; review the loan terms and final payment obligation carefully. The example appears in the CFPB’s mortgage payment explanation.
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