How to Calculate a Mortgage Payment (Formula and Example)
Updated October 22, 2026
Your mortgage payment is the fixed amount that pays off the loan, with interest, over the amortization period. You can work it out with one formula, and this guide shows how.
The formula
Payment = loan × i ÷ (1 − (1 + i)^−N), where i is the interest rate for one payment period and N is the total number of payments. For monthly payments, i is the yearly rate divided by 12 and N is the years times 12.
In Canada, fixed-rate mortgages must state their interest with semi-annual compounding, so the monthly rate is (1 + rate ÷ 2)^(1/6) − 1, a little lower than the quoted rate divided by 12. Variable-rate mortgages usually compound monthly.
Worked example: $500,000 at 5% over 25 years (Canadian fixed rate)
- The monthly rate is (1 + 0.05 ÷ 2)^(1/6) − 1 = about 0.4124%.
- The number of payments is 25 × 12 = 300.
- The payment is $500,000 × 0.004124 ÷ (1 − 1.004124^−300) = $2,908.02 a month.
- Over 25 years you pay about $872,407 in total, of which about $372,407 is interest.
How the amortization changes the cost
| Amortization | Monthly payment | Total interest |
|---|---|---|
| 15 years | $3,940.62 | $209,311 |
| 20 years | $3,285.63 | $288,550 |
| 25 years | $2,908.02 | $372,407 |
| 30 years | $2,668.45 | $460,643 |
How the interest rate changes the payment
One percentage point is worth roughly $280 to $290 a month on this mortgage, which is worth remembering when you renew.
| Rate | Monthly payment on $500,000 over 25 years |
|---|---|
| 4% | $2,630.10 |
| 5% | $2,908.02 |
| 6% | $3,199.03 |
Where the money goes
At the start, most of each payment is interest. In the example, the first payment is about $2,062 of interest and only $846 of principal. After five years you would still owe about $442,538. Extra payments early on save the most, because they cut the balance on which interest is charged.
| Extra each month | Time to pay off | Interest saved |
|---|---|---|
| None | 25 years | - |
| $100 | About 23.5 years | $26,941 |
| $200 | About 22.1 years | $50,018 |
| $500 | About 18.8 years | $103,138 |
In Excel or Google Sheets
For monthly compounding use =PMT(rate/12, years*12, -loan). For a Canadian fixed rate use =PMT((1+rate/2)^(1/6)-1, years*12, -loan). The mortgage payment calculator on this site does both, plus CMHC insurance, and works for the US, UK, Australia and India too.
Frequently asked questions
Does the payment include property tax and insurance?
The formula covers only the loan: principal and interest. Property tax, home insurance and condo fees are extra. In the US they are often collected with the payment (an escrow), in Canada you usually pay them separately.
What is the difference between amortization and term?
The amortization is how long it would take to repay the whole loan, such as 25 years. The term is how long your rate and lender agreement last, such as 5 years, after which you renew at the rate then on offer.