Mortgage Calculator

What is a mortgage?

A mortgage is a loan used to purchase a home, where the property itself serves as collateral. You borrow a set amount (the loan principal) and repay it over a fixed term (typically 15 or 30 years) with interest. Your monthly payment usually includes principal, interest, property taxes, and homeowners insurance (often called PITI).

How is my monthly mortgage payment calculated?

The principal-and-interest portion uses the standard amortization formula:

M = P * [ r(1 + r)^n ] / [ (1 + r)^n - 1 ]

Where P = loan amount, r = monthly interest rate (annual rate / 12), and n = total number of payments (years * 12). Your full monthly payment adds property tax, homeowners insurance, PMI (if applicable), and HOA fees on top of that.

What is included in my monthly payment?

Your total monthly payment may include up to five components:

• Principal and Interest (P&I), the core loan repayment
• Property tax, typically 0.5% to 2.5% of your home value per year
• Homeowners insurance, usually $1,200 to $2,000 per year
• PMI, required if your down payment is less than 20%
• HOA fees, applicable for condos, townhomes, or planned communities

What is PMI, and when can I remove it?

Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20% of the home price. It typically costs 0.3% to 1.5% of your original loan amount per year. Under the federal Homeowners Protection Act (HPA), you can request PMI cancellation once your loan balance reaches 80% of your home's original value. Your lender must automatically terminate PMI when your balance drops to 78% through scheduled payments.

How much house can I afford?

A widely used guideline is the 28/36 rule:

• Your total housing costs (mortgage + tax + insurance + PMI + HOA) should not exceed 28% of your gross monthly income.
• Your total monthly debt (housing + car payments + student loans + credit cards) should not exceed 36%.

For example, at a $100,000 annual income with 10% down and a ~6.5% rate, you could comfortably afford roughly a $300,000 to $350,000 home. Lenders may approve higher ratios (up to 43% to 50% DTI), but stretching beyond 36% can leave little room for savings or emergencies.

What is an amortization schedule?

An amortization schedule is a month-by-month table showing how each payment is split between principal and interest over the life of your loan. In the early years, most of your payment goes toward interest. Over time, the balance shifts, and by the final years, nearly all of each payment goes toward principal. This calculator generates a full amortization schedule so you can see exactly where your money goes.

Should I choose a 15-year or 30-year mortgage?

A 30-year mortgage has lower monthly payments but you pay significantly more interest over the life of the loan. A 15-year mortgage has higher monthly payments but a much lower total cost. For example, on a $320,000 loan at 6.5%, the 30-year P&I is about $2,023/month with about $408K total interest, while a 15-year at 5.75% would be about $2,660/month with only about $159K total interest. Choose based on your budget flexibility and long-term goals.

What is the difference between fixed-rate and adjustable-rate mortgages?

A fixed-rate mortgage locks your interest rate for the entire loan term and your P&I payment never changes. An adjustable-rate mortgage (ARM), such as a 5/1 or 7/1 ARM, offers a lower initial rate for a set period (5 or 7 years), then adjusts periodically based on market conditions. ARMs typically start 0.75% to 1% lower than fixed rates. Fixed-rate loans account for 70% to 90% of U.S. mortgages and are ideal if you plan to stay long-term; ARMs can save money if you expect to sell or refinance within the initial fixed period.

How do extra payments help?

Extra payments go directly toward your loan principal, which reduces the balance faster, cuts total interest, and shortens your loan term. Even $200/month extra on a $320,000 loan at 6.5% can save over $100,000 in interest and cut roughly 7 years off a 30-year mortgage. Always confirm your loan doesn't have a prepayment penalty before making extra payments (most conventional loans don't).

How does my down payment affect my mortgage?

A larger down payment means a smaller loan, lower monthly payments, less total interest, and potentially a better interest rate. Putting down 20% or more also eliminates PMI, saving you 0.3% to 1.5% of the loan amount per year. Common minimum down payments are 3% (conventional), 3.5% (FHA), and 0% (VA/USDA for eligible borrowers).

What are closing costs?

Closing costs are one-time fees paid when you finalize your mortgage. They typically range from 2% to 5% of the purchase price. On a $400,000 home, expect roughly $8,000 to $20,000. They include lender origination fees, appraisal, title insurance, attorney fees, recording fees, and prepaid taxes or insurance. These are separate from your down payment.

What are property taxes, and how do they affect my payment?

Property taxes are assessed by your local government based on your home's value. The national average is about 1.1% of home value per year, but rates vary widely from under 0.5% in some states to over 2% in others. Most lenders collect property tax monthly as part of your mortgage payment and hold it in an escrow account, paying the tax bill on your behalf.

What are HOA fees?

Homeowners Association (HOA) fees are monthly or annual charges in certain communities, especially condos, townhomes, and planned developments. They cover shared amenities and maintenance such as landscaping, pools, and exterior upkeep. HOA fees typically range from $100 to $700+ per month and are added on top of your mortgage payment. This calculator includes HOA in your total monthly cost estimate.

What credit score do I need for a mortgage?

Minimum credit score requirements vary by loan type: conventional loans are typically 620+ with best rates at 740+, FHA loans are 580+ for 3.5% down or 500 to 579 with 10% down, and VA loans have no official minimum though most lenders want 620+. A higher credit score can save you significantly, even a 0.25% rate difference on a $320,000 loan adds up to thousands over the life of the mortgage. Check your score and dispute any errors before applying.

How accurate is this calculator?

This calculator uses the standard amortization formula used by banks and lenders. The principal-and-interest figure matches within a few cents of lender calculations (tiny differences are due to intermediate rounding). Property tax, insurance, PMI, and HOA estimates depend on the values you enter. For a precise payment quote, get a Loan Estimate from your lender, which they are required to provide within 3 business days of your application.