How Mortgage Payments Work: Principal, Interest & Amortization
How a fixed-rate mortgage payment is calculated, what amortization means, and what the P&I payment does not include (taxes, insurance, PMI, HOA).
The monthly payment (P&I)
A fixed-rate mortgage has equal monthly payments of principal and interest for the whole term. The amount depends on the loan size, the interest rate, and the term (commonly 15 or 30 years).
Amortization
Early in the loan, most of each payment goes to interest and little to principal. Over time that flips, and the balance falls faster near the end. A longer term lowers the monthly payment but increases total interest paid.
What P&I does not include
Property tax, homeowners insurance, private mortgage insurance (PMI, usually required if you put down less than 20%), and HOA dues are extra. Your true monthly housing cost is higher than P&I alone.
FAQ
What is PMI?
Private mortgage insurance protects the lender when your down payment is under 20%. It adds to your monthly cost until you reach enough equity.
Does a longer term save money?
It lowers the monthly payment but raises the total interest you pay over the life of the loan.
Related calculators
Last updated: 2026-07-25 · This content is a 2026 reference and may differ from actual rules and rates.