How the monthly payment is calculated
A fixed-rate mortgage uses the standard amortization formula: M = P × r × (1 + r)^n ÷ [(1 + r)^n − 1], where P is the loan amount (home price minus down payment), r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments (360 for a 30-year loan). The payment never changes, but the split does: early payments are mostly interest, and the principal share grows a little every month as the balance falls.
Worked example: a $400,000 home with 20% down leaves a $320,000 loan. At 6.5% on a 30-year fixed, r = 0.065 ÷ 12 = 0.005417 and n = 360, so the principal-and-interest payment is $2,022.62. Over the full term you would pay about $408,142 in interest, more than the amount you borrowed. Switch the same loan to 15 years and the payment rises to $2,787.54, but total interest drops to about $181,758.
PITI: what else goes into the payment
Lenders quote the P&I payment, but what leaves your bank account each month is usually PITI: principal, interest, taxes and insurance. Most borrowers pay property tax and homeowners insurance into an escrow account in twelve monthly installments, and the servicer pays the bills when they come due. Condo and planned-community buyers add HOA dues on top. In the default example, $4,800 a year in property tax and $1,500 in insurance add $525 a month, bringing the total to $2,547.62.
Private mortgage insurance (PMI) applies to conventional loans with less than 20% down. It typically runs 0.3% to 1.5% of the loan amount per year depending on your credit score and down payment; this calculator assumes 0.5%. You can request cancellation once your balance falls to 80% of the original value, and servicers must drop it automatically at 78%. FHA loans use a different mortgage insurance premium that this tool does not model.
Using the amortization schedule
The table lists every payment in year one, then the first payment of each subsequent year, then the last payment. Watch the balance column: on a 30-year loan at 6.5% you have paid off only about 15% of the principal after 10 years. Any extra amount you send toward principal shortens the loan and removes all the interest that balance would have generated, which is why even $100 a month extra can cut a 30-year loan by several years.
The rate you enter should be the note rate, not the APR you see in ads. APR folds in points and fees and is useful for comparing offers, but the payment formula uses the note rate. Results here are estimates for planning; your Loan Estimate from the lender is the number to rely on.