Mortgage payment formula
A fixed-rate mortgage payment is the level payment that repays the principal with interest over the term.[1]
Example: $285,000 at 7.125% for 30 years. r = 0.005938, n = 360, payment = $1,920.10. Over the full term the interest adds up to $406,235. The same formula with annual payments reproduces Texas A&M's published example: $100,000 at 10% for 25 years costs $11,017 a year.[2]
| Rate | Payment | Loan constant (annual payment ÷ loan) |
|---|---|---|
| 5% | $536.82 | 6.44% |
| 6% | $599.55 | 7.19% |
| 6.5% | $632.07 | 7.58% |
| 7% | $665.30 | 7.98% |
| 7.5% | $699.21 | 8.39% |
| 8% | $733.76 | 8.81% |
The loan constant is always higher than the interest rate, because each payment also repays principal.[2] Compare it with a property's cap rate to see whether borrowing raises or lowers your cash-on-cash return.
Down payment limits on investment property
Agency loans allow less leverage on investment property than on a home you live in, which is the idea behind house hacking a 2–4 unit building. Fannie Mae's eligibility matrix (Desktop Underwriter, August 2026):[6]
| Occupancy and transaction | 1 unit | 2–4 units |
|---|---|---|
| Investment property, purchase | 85% LTV (15% down) | 75% LTV (25% down) |
| Investment property, cash-out refinance | 75% | 70% |
| Principal residence, purchase (for comparison) | up to 97% | 95% |
Fannie Mae also charges loan-level price adjustments by occupancy; for an investment-property purchase they run from 1.125% of the loan at low LTVs to 4.125% above 80% LTV.[7] How a lender reflects these adjustments in the rate or fees it quotes you varies, so compare full quotes, including points, from more than one lender.
Investment property mortgage rates today
There is no official survey of investment-property mortgage rates, so the usual benchmark is Freddie Mac's weekly survey of owner-occupied home loans: on November 12, 2026 the average 30-year fixed rate was 7.11% and the 15-year was 6.45%, up from 6.24% and 5.49% a year earlier.[3] That survey covers borrowers with good credit buying a one-unit home they will live in with 20% down, so expect an investment loan to be priced above it once the investment-property adjustments below are added.
| Benchmark | Latest | Date |
|---|---|---|
| 30-year fixed (Freddie Mac PMMS, owner-occupied) | 7.11% | Nov 12, 2026 |
| 15-year fixed (Freddie Mac PMMS, owner-occupied) | 6.45% | Nov 12, 2026 |
| Federal funds target range (FOMC) | 3.75%–4.00% | Oct 28, 2026 |
The Federal Reserve held its target range at 3¾ to 4 percent on October 28, 2026; its next meeting is December 8–9.[4] Since November 4, 2026, Fannie Mae's Selling Guide also requires investment-property loans to receive an Approve/Eligible recommendation from its automated underwriting system.[5]
PITIA: the full monthly payment
Lenders and DSCR lenders look at PITIA: principal, interest, taxes, insurance and association dues. Taxes and insurance are often collected monthly into an escrow account that the servicer uses to pay the bills.[10] Private mortgage insurance is generally required on a conventional loan with less than 20% down and protects the lender, not you.[9]
When rent helps you qualify, Fannie Mae counts 75% of gross monthly rent and subtracts PITIA.[11] Closing costs are separate from the down payment; the CFPB puts them at 2% to 5% of the purchase price.[8]
Rates are your inputThis calculator does not quote rates. Enter the rate a lender has offered you. To see whether the payment works for the property, run the rental property calculator or the DSCR calculator. For apartment buildings with a balloon term, use the commercial mortgage calculator.
Frequently asked questions
How much down payment do I need for an investment property?
For a Fannie Mae conventional loan underwritten through Desktop Underwriter, at least 15% for a one-unit investment property and 25% for two to four units. Other loan programs have their own limits.
How is a mortgage payment calculated?
Payment = P × r ÷ (1 − (1 + r)^−n), with the loan amount P, the monthly rate r and the number of payments n. $200,000 at 6% for 30 years is $1,199.10 a month.
Why do investment property loans cost more?
Fannie Mae charges loan-level price adjustments on investment-property loans that rise with the loan-to-value ratio, from 1.125% to 4.125% of the loan on a purchase. How a lender passes them on varies, so compare quotes including points.
What is PITIA?
Principal, interest, taxes, insurance and association dues: the full monthly housing payment lenders use when they qualify a loan.
Sources
- L13: Loan Payments, Credit Cards and Mortgages (Math 141 course notes)
- Etter, W. E. Calculating Mortgage Loans (Publication 923)
- Primary Mortgage Market Survey (weekly averages as of November 12, 2026)
- Federal Reserve issues FOMC statement
- B2-1.1-01, Occupancy Types (Selling Guide)
- Eligibility Matrix
- Loan-Level Price Adjustment Matrix
- Figure out how much you want to spend (Owning a Home)
- What is private mortgage insurance?
- What is an escrow or impound account?
- B3-3.8-02, Rental Income from the Subject Property (Selling Guide)