Understanding Your Mortgage Principal & Interest (P&I)
A mortgage is typically the largest loan most people will ever take on. Understanding its components is crucial for responsible homeownership and financial planning. The monthly payment for a mortgage is generally broken down into two main parts: Principal and Interest (P&I). This calculator focuses specifically on determining that core P&I payment.
What is Principal?
The principal is the actual amount of money you borrowed from the lender to purchase your home. Each month, a portion of your payment goes towards reducing this outstanding loan balance.
What is Interest?
Interest is the cost of borrowing money. It's essentially a fee charged by the lender for providing you with the loan. The interest rate is expressed as a percentage of the outstanding loan balance. In the early years of a mortgage, a larger portion of your payment goes towards interest, while more of your payment goes towards principal in the later years.
How the P&I Calculation Works
The monthly Principal & Interest payment is calculated using the following standard mortgage payment formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Your total monthly mortgage payment (Principal & Interest)
P = The principal loan amount (the amount you borrowed)
i = Your monthly interest rate (your annual interest rate divided by 12)
n = The total number of payments over the loan's lifetime (your loan term in years multiplied by 12)
For example, if you borrow $200,000 at an annual interest rate of 3.5% for 30 years:
Plugging these values into the formula results in a monthly P&I payment of approximately $898.09.
Beyond P&I: What Else is Included in Your Total Mortgage Payment?
It's important to remember that your total monthly housing payment will likely be higher than just the P&I calculated here. Lenders often bundle other costs into your monthly mortgage payment for convenience. These typically include:
Property Taxes: Funds set aside to pay your local property taxes.
Homeowners Insurance: Premiums for your homeowner's insurance policy.
Private Mortgage Insurance (PMI): If your down payment is less than 20%, you'll likely pay PMI.
HOA Dues: If you live in a community with a Homeowners Association.
While this calculator focuses on the fundamental P&I, it's the cornerstone upon which your total monthly housing cost is built. Use this tool to understand the core cost of your mortgage based on loan amount, interest rate, and term.
function calculateMortgage() {
var loanAmount = parseFloat(document.getElementById("loanAmount").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseInt(document.getElementById("loanTerm").value);
var resultElement = document.getElementById("result");
if (isNaN(loanAmount) || isNaN(annualInterestRate) || isNaN(loanTerm) || loanAmount <= 0 || annualInterestRate < 0 || loanTerm 0) {
monthlyPayment = loanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
// Handle case of 0% interest rate
monthlyPayment = loanAmount / numberOfPayments;
}
// Format the result to two decimal places and add currency symbol
var formattedMonthlyPayment = "$" + monthlyPayment.toFixed(2);
resultElement.innerHTML = formattedMonthlyPayment + "Monthly Principal & Interest Payment";
}