How the monthly payment is calculated
A fixed-rate mortgage payment is set so the loan is fully repaid by the end of the term. The standard formula is M = P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1), where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12) and n is the number of monthly payments.
Your full housing payment — often called PITI — adds monthly property tax and homeowners insurance to principal and interest. Lenders use PITI, not just principal and interest, when qualifying you for a loan.
Investment property loans
Loans on rental properties typically require larger down payments (often 15–25%) and carry slightly higher interest rates than loans on a primary residence. Small differences matter: on a $240,000 30-year loan, a 0.5% higher rate adds roughly $80 a month and about $29,000 in total interest.
Extra principal payments shorten the loan and cut total interest. The calculator shows how much an extra monthly amount saves and how many years it takes off the term.
Frequently asked questions
What is PITI?
Principal, interest, taxes and insurance — the four parts of a typical monthly mortgage payment. HOA dues and mortgage insurance are sometimes added on top.
Is a 15-year or 30-year mortgage better for a rental?
A 15-year loan has a higher payment but much less total interest. A 30-year loan lowers the payment, which improves monthly cash flow. Many investors prefer the 30-year term for flexibility and prepay when it makes sense.
How much does a larger down payment help?
A larger down payment lowers the loan amount, the monthly payment and total interest, but ties up more cash, which can lower your cash-on-cash return. Compare both effects with the ROI calculator.
More real estate calculators
For informational purposes only. Tax rules change and depend on your situation — consult a tax professional or financial advisor before making investment decisions.