How to Calculate Your Mortgage Payment in 2026 (With Real Numbers)
The exact formula lenders use, a worked example on a $400,000 home, 30-year vs 15-year comparison, and how much salary you need to afford different home prices. US-specific, 2026 rates.
If you’ve ever gotten a mortgage payment estimate and thought “that can’t be right,” you’re not alone. The number that comes back from a lender often looks different from what you calculated, and it’s usually because of three things: property taxes, homeowners insurance, and whether PMI got included. This guide walks through all of it.
The Formula Lenders Use
Every fixed-rate mortgage payment — conventional, FHA, jumbo — uses the same amortization formula:
M = P × [r(1+r)^n] / [(1+r)^n − 1]
- M = monthly payment (principal + interest only)
- P = loan amount (purchase price minus down payment)
- r = monthly interest rate (annual rate ÷ 12)
- n = total number of monthly payments (loan term × 12)
Worked Example: $400,000 Home, 20% Down, 6.75%, 30 Years
- Loan amount P = $400,000 × 80% = $320,000
- Monthly rate r = 6.75% ÷ 12 = 0.5625% = 0.005625
- Total payments n = 30 × 12 = 360
M = $320,000 × [0.005625 × (1.005625)^360] / [(1.005625)^360 − 1] = $2,076/month
That’s principal and interest. Your actual monthly payment (PITI) adds:
- Property taxes: ~$417/month (assuming 1.25% annual rate on $400k value)
- Homeowners insurance: ~$150/month
- PMI: $0 (you put 20% down)
Total PITI: ~$2,643/month
Compare that to what your lender quotes — if it’s higher, they’re using a different tax estimate or insurance figure. If it’s lower, make sure they’re including escrow.
Use the mortgage calculator to run any scenario in seconds.
What PITI Actually Means
Almost every mortgage payment has four parts. Lenders call it PITI:
Principal — The portion that reduces what you owe. In month one of a $320,000 loan at 6.75%, this is only about $276. In month 360, it’s almost the entire payment.
Interest — Calculated on your remaining balance each month. Month one: $320,000 × 0.5625% = $1,800. As you pay down principal, this shrinks.
Taxes — Your county property tax, divided by 12 and added to each payment. Your lender holds it in an escrow account and pays the tax bill when it’s due. Property taxes vary enormously by state — from under 0.3% in Hawaii to over 2.2% in New Jersey and Illinois.
Insurance — Homeowners insurance premium, also escrowed. Plus PMI if you’re putting less than 20% down.
PMI: The Cost of Under 20% Down
PMI (Private Mortgage Insurance) protects the lender, not you, if you default. It applies to conventional loans with less than 20% down. Typical cost: 0.5%–1.5% of the loan per year.
On a $320,000 loan at 1% PMI rate: $267/month extra until you hit 20% equity.
How to get rid of PMI:
- Request removal when your balance reaches 80% of original purchase price — your lender is required to remove it at this point if you ask and your payments are current.
- Automatic cancellation when your balance reaches 78% of original price under the Homeowners Protection Act.
- Refinance if home values have risen enough that you now have 20%+ equity based on current appraised value.
FHA loans have their own version called MIP (Mortgage Insurance Premium) — it works differently and, for many FHA loans originated after June 2013, it never goes away regardless of equity. This is one reason conventional loans with PMI can be better long-term even if the initial rate is higher.
How Much Salary Do You Need?
Most conventional lenders use the 28/36 rule:
- Housing costs (PITI) ≤ 28% of gross monthly income
- All debt payments combined ≤ 36% of gross monthly income
For more on this topic, see our guide: Can I Buy a House With 3% Down in 2026? Real Costs on a $420,000 Home.
Here’s what that looks like at different home prices (2026, 20% down, 6.75%, 1.25% property tax):
| Home Price | Loan | Est. PITI | Required Annual Income |
|---|---|---|---|
| $300,000 | $240,000 | ~$2,050/mo | ~$88,000/yr |
| $400,000 | $320,000 | ~$2,650/mo | ~$114,000/yr |
| $500,000 | $400,000 | ~$3,250/mo | ~$139,000/yr |
| $600,000 | $480,000 | ~$3,850/mo | ~$165,000/yr |
| $750,000 | $600,000 | ~$4,750/mo | ~$204,000/yr |
These assume no other major debt. If you have a $600/month car payment or significant student loan payments, subtract those from the housing budget.
30-Year vs 15-Year: The Real Trade-Off
The 15-year vs 30-year decision is one of the most impactful in personal finance. Here’s the honest comparison on a $320,000 loan at current rates:
30-year at 6.75%:
- Monthly P&I: $2,076
- Total interest paid: $427,360
- Total cost: $747,360
15-year at 6.25% (rates typically run 0.5% lower):
- Monthly P&I: $2,743
- Total interest paid: $173,740
- Total cost: $493,740
The 15-year saves $253,620 in interest but costs $667 more per month. Whether that trade-off works for you depends on:
- Can you genuinely afford $667 more per month without it creating financial stress?
- What else would you do with that $667? If the answer is “put it in a Roth IRA earning 7%+,” the math sometimes favors the 30-year.
- How long do you plan to own the home? Under 7 years, the interest savings don’t fully materialize.
- Do you have other high-interest debt? Pay that first before chasing mortgage payoff.
There’s no universally right answer, but financially stable households with strong income and low other debt usually benefit from the 15-year.
The 2026 Conforming Loan Limit
The FHFA sets the conforming loan limit — the maximum loan size that Fannie Mae and Freddie Mac will back. For 2026 it’s $832,750 for most US counties.
Loans at or below this limit qualify for conventional conforming rates. Above it, you’re in jumbo territory — typically 0.25%–0.5% higher rates and stricter qualification requirements (higher credit score, larger down payment, more cash reserves).
High-cost areas like San Francisco, LA, New York City, and Washington DC have higher limits — up to $1,249,125 in 2026. Check your specific county’s limit at the FHFA website before assuming you’re in conforming territory.
How Credit Score Affects Your Rate
Your FICO score is the biggest factor in the rate you’re offered. Approximate spread in 2026:
| FICO Score | Approx Rate Premium |
|---|---|
| 760+ | Best available (advertised rate) |
| 720–759 | +0.25% |
| 680–719 | +0.5%–0.75% |
| 640–679 | +1%–1.5% |
| Below 640 | FHA territory, significantly higher |
On a $320,000 30-year mortgage, going from 680 to 760 saves roughly $150/month — or $54,000 over the life of the loan. If you’re sitting at 680 and not in a rush, spending 6–12 months getting to 720+ before applying is absolutely worth the time.
Strategies That Actually Move the Needle
Shop at least three lenders. Mortgage rates aren’t fixed — different lenders quote different rates for the same borrower profile. A 0.25% rate difference on a $400,000 loan saves about $50/month and roughly $18,000 in total interest. Getting quotes from your bank, a credit union, and an online lender like Better or LoanDepot is standard practice, not unusual.
Bi-weekly payments. Pay half your monthly payment every two weeks instead of the full amount monthly. You’ll make 26 half-payments per year (13 full payments) instead of 12. On a 30-year mortgage, this alone shaves 4–6 years off the loan without refinancing.
For more on this topic, see our guide: Monthly Payment on a $150,000 Mortgage at 2026 Rates: Full Breakdown.
Round up your payment. Adding $200/month to a $320,000 loan at 6.75% saves approximately $89,000 in interest and pays the loan off 6 years early.
Buy points if you’re staying. One mortgage point = 1% of the loan upfront in exchange for a lower rate (typically 0.25% reduction). On a $320,000 loan, one point costs $3,200 and saves about $53/month. Break-even = $3,200 ÷ $53 = 60 months. If you’re staying 5+ years, buying points makes economic sense.
Use our free mortgage calculator to calculate your specific payment with taxes, insurance, and PMI — plus a full amortization schedule showing exactly when your loan is paid off.