Updated September 2026
The calculator's monthly mortgage payment isn't a rough estimate — it's the standard amortization formula lenders themselves use. This page walks through exactly how it works, step by step, and is explicit about what it does and doesn't include.
M = P × [r(1+r)n] / [(1+r)n − 1]
where M is the monthly principal & interest payment, P is the loan principal (purchase price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (loan term in years × 12). This is the standard fixed-rate amortization formula — the same one behind every mortgage payment table and lender payment calculator.
A $200,000 property, 20% down ($40,000), financed at 7% for 30 years: principal P = $160,000, monthly rate r = 0.07/12 ≈ 0.005833, n = 360 payments. Plugging into the formula gives a monthly principal & interest payment of roughly $1,064. Over the full 30 years that's about $383,000 paid in total — roughly $223,000 of it interest, on a $160,000 loan, which is the single biggest reason the interest rate matters as much as the price itself.
Early in a fixed-rate loan's life, most of each payment is interest — on the example above, the very first monthly payment is roughly $933 interest and only about $131 principal. As the balance shrinks, the interest portion of each fixed payment shrinks with it and the principal portion grows, so by the later years most of the payment is going toward principal. This matters for rental property analysis specifically because cap rate and NOI ignore the mortgage entirely, while cash-on-cash return is measured against a cash flow that includes the full payment — early in a loan's life, a larger share of that cash outflow is "real" interest expense rather than equity you're building, which is worth keeping in mind when comparing a highly leveraged early-year cash-on-cash number against a cap rate on the same deal.
Setting down payment to 100% in the calculator sets the mortgage payment to $0 — no amortization schedule applies because there's no loan. In that case cash-on-cash return converges toward being mathematically closer to cap rate (since the only "cash invested" is the price plus closing costs and repairs, and there's no mortgage payment separating operating cash flow from NOI), which is exactly the relationship described on the cap rate vs. cash-on-cash section of the homepage.
Because the mortgage payment is usually the single largest line in monthly outflow, small differences in assumed interest rate or loan term move cash flow more than almost any other input — a 1-point difference in interest rate on a $160,000 loan changes the monthly payment by roughly $100, which is often the difference between a deal that cash flows and one that doesn't. Always use your actual quoted rate and term, not a rough guess, once you're seriously evaluating a specific property.
Why is my quoted mortgage payment higher than this calculator's number? Likely because your quote bundles property tax and insurance escrow, and/or PMI, into the total monthly payment — this calculator's mortgage figure is principal & interest only; tax and insurance are entered separately.
Does a shorter loan term always mean a worse cash-on-cash return? Usually, yes for cash flow specifically — a 15-year term has a meaningfully higher monthly payment than a 30-year term on the same loan, even though it builds equity faster and costs far less total interest. Try both terms in the calculator to see the trade-off on your specific numbers.
What if the interest rate field is set to 0%? The formula simplifies to principal divided evenly across the number of payments — useful for modeling a seller-financed or otherwise interest-free loan, though this is uncommon in practice.
This page is educational only, not financial advice. Always confirm actual loan terms, fees and insurance requirements with your lender.