How to Calculate a Mortgage Payment: Complete 2026 Guide

Understanding Your Monthly Mortgage Payment

For most people, a mortgage is the single largest monthly expense they will ever have. Knowing exactly how your payment breaks down — and how to calculate it before you talk to a lender — puts you in control of one of life's biggest financial decisions.

A mortgage payment is not just principal and interest. It typically includes four components, often remembered by the acronym PITI: Principal, Interest, Taxes, and Insurance. In Canada, you may also see the acronym GDS (Gross Debt Service) as a qualification benchmark.

The Mortgage Payment Formula

The standard formula for calculating the monthly principal and interest (P&I) portion of a fixed-rate mortgage is:

Where:

• M = Monthly payment (principal + interest)
• P = Principal loan amount
• r = Monthly interest rate (annual rate ÷ 12)
• n = Total number of payments (loan term in years × 12)

This is an amortizing loan formula — each payment covers the interest due and reduces the principal, so over time your equity grows and the interest portion shrinks.

Example: Calculating P&I on a $400,000 Loan

Let us say you are borrowing $400,000 at a 6.5% annual interest rate for 30 years:

• P = $400,000
• r = 6.5% ÷ 12 = 0.005417 (0.5417% per month)
• n = 30 × 12 = 360 payments
• M = 400,000 × [0.005417(1.005417)^360] / [(1.005417)^360 − 1]
• M ≈ $2,528/month (principal + interest only)

Over the full 30-year term, you will pay approximately $910,000 total — $400,000 in principal and $510,000 in interest.

Beyond P&I: The Full PITI Payment

Your actual monthly housing cost includes three additional components:

Property Taxes

Property taxes vary by location and are typically 0.5%–2.5% of the home's assessed value per year. They are usually collected by the lender through escrow and paid on your behalf. For a $500,000 home in a 1.2% tax area:

Homeowners Insurance

A standard homeowners insurance policy costs about $800–$1,500 per year depending on coverage level, location, and the home's replacement cost:

PMI or Mortgage Insurance

If your down payment is less than 20%, you will pay Private Mortgage Insurance (PMI) in the US, or CMHC insurance in Canada. PMI typically costs 0.3%–1.5% of the loan amount per year:

Total PITI Example

Putting it all together for a $400,000 loan on a $500,000 home:

The 28/36 Rule: How Lenders Qualify You

Lenders use the 28/36 rule to determine how much you can borrow. This guideline says:

• 28% maximum: Your total housing costs (PITI) should not exceed 28% of your gross monthly income.
• 36% maximum: Your total debt payments (housing + car loans, student loans, credit cards, etc.) should not exceed 36% of your gross monthly income.

If your gross annual income is $100,000 ($8,333/month):

• Max housing payment: $8,333 × 0.28 = $2,333/month
• Max total debt: $8,333 × 0.36 = $3,000/month

In Canada, the equivalent is the GDS/TDS ratios. The Gross Debt Service ratio (housing costs ÷ income) should be at or below 39%, and the Total Debt Service ratio (all debt payments ÷ income) should be at or below 44% for most lenders.

Fixed-Rate vs. Adjustable-Rate Mortgages

The type of mortgage you choose dramatically affects your payment calculation:

Fixed-Rate Mortgage (FRM)

Your interest rate stays the same for the entire loan term. Payments are predictable and never change. Most homeowners choose 30-year or 15-year fixed rates. In 2026, 30-year fixed rates hover around 6–7%.

Adjustable-Rate Mortgage (ARM)

The rate is fixed for an initial period (5, 7, or 10 years), then adjusts periodically based on a benchmark index plus a margin. ARMs typically start 1–2% lower than fixed rates, but payments can increase significantly after the initial period. In Canada, variable-rate mortgages are more common and function similarly.

Canadian Mortgage Differences

Canadian mortgages operate differently from US mortgages in two key ways:

• Shorter terms: Most Canadian mortgages have 5-year terms, after which you renew at current rates.
• Amortization up to 30 years (25 years for high-ratio mortgages with CMHC insurance).
• Stress test: You must qualify at the higher of your contract rate + 2% or the Bank of Canada's qualifying rate (5.25% as of 2026).

Hidden Costs That Impact Affordability

Beyond PITI, smart home buyers account for these additional costs:

• Closing costs: 2–5% of the purchase price. Includes origination fees, appraisal, title search, legal fees, and prepaid items.
• HOA fees: $100–$600/month for condos or planned communities.
• Maintenance reserves:Budget 1–2% of the home's value annually for repairs and maintenance.
• Utilities: Water, gas, electricity, trash — often higher in single-family homes vs. apartments.
• Moving costs: Professional movers, boxes, storage, setup fees.

A realistic total housing budget should factor in 25–35% above PITI for these expenses.

Use Our Free Mortgage Calculator Suite

Instead of crunching the amortization formula by hand or juggling spreadsheet formulas, use our Real Estate & Mortgage Suite. It includes six integrated calculators that handle everything:

• Max affordability calculator (28/36 and GDS/TDS rules)
• Monthly payment breakdown (PITI)
• Rent vs. buy NPV analysis
• Closing cost estimator
• Amortization schedule
• Refinance savings calculator

Supports all 50 US states and 13 Canadian provinces/territories, with up-to-date rates and qualification rules.