Mortgage Calculator

What a mortgage payment includes

Most people think of a mortgage payment as simply the cost of borrowing money to buy a home, but a full payment is made up of several components. The acronym PITI covers the core four: principal, interest, taxes, and insurance. On top of those, many borrowers also pay private mortgage insurance (PMI) if their down payment was less than 20 percent, and some properties add a homeowners association (HOA) fee each month. When a lender qualifies you for a loan, they look at the combined total of all these costs, not just the principal and interest, so understanding the full picture matters before you commit to a purchase price.

Principal and interest: the amortization formula

The principal and interest portion of your payment is calculated using the standard amortization formula. With a loan amount P, a monthly interest rate r (your annual rate divided by 12 and by 100), and a total number of payments n (your term in years multiplied by 12), the fixed monthly payment is P times r times (1 plus r) to the power of n, divided by ((1 plus r) to the power of n, minus 1). Each month, a portion of that fixed payment covers the interest charged on the remaining balance, and the rest reduces the balance. In the early years of a 30-year mortgage, the split is heavily weighted toward interest; as the balance falls over time, more of each payment goes toward principal. This is why making extra principal payments early in the loan has a disproportionately large effect on total interest paid.

Property tax and insurance in escrow

Lenders almost always require borrowers to escrow property tax and homeowners insurance. Escrow means your lender collects one-twelfth of each annual bill with every monthly payment and holds that money in a dedicated account. When your tax or insurance bill comes due, the lender pays it directly. This protects the lender by ensuring the property is always insured and the tax obligation never goes unpaid, which could otherwise result in a lien that takes priority over the mortgage. For you as a homeowner, escrow spreads those large annual bills into predictable monthly amounts. Property tax rates vary significantly by location, typically ranging from under 0.5 percent to over 2.5 percent of the home's assessed value per year. Homeowners insurance typically runs between 0.5 and 1.5 percent of the home value annually, depending on the coverage level, location, and claim history.

PMI and when it drops off

Private mortgage insurance protects the lender, not you, in the event of default. It is required by conventional lenders when your down payment is less than 20 percent of the purchase price because the lender is taking on more risk with a highly leveraged loan. The cost varies by lender, loan type, and credit score, but a common estimate is 0.5 percent of the loan amount per year, which is what this calculator uses. On a $320,000 loan, that is about $133 per month. Under the federal Homeowners Protection Act, you can request PMI cancellation once your loan balance reaches 80 percent of the original purchase price, and lenders must cancel it automatically when the balance hits 78 percent. If home values rise significantly, you may be able to request a new appraisal and cancel PMI earlier based on the updated value.

How the down payment and loan term change your payment

A larger down payment reduces your loan amount directly, which lowers both your monthly principal and interest payment and your total interest over the life of the loan. It also eliminates PMI once you reach or exceed 20 percent of the purchase price. A shorter loan term compresses the same balance into fewer payments, so each payment is higher, but the total interest paid drops dramatically. A 15-year mortgage on a $300,000 loan at 7 percent costs roughly $2,696 per month in P&I, compared to roughly $1,996 on a 30-year loan, but the 15-year borrower pays approximately $185,000 in total interest versus approximately $419,000 on the 30-year loan. Most homeowners find the 30-year payment more manageable and then pay extra principal when cash flow allows, capturing some of the interest savings without the commitment of a shorter term.

Fixed vs. adjustable rate mortgages

This calculator assumes a fixed-rate mortgage, meaning your interest rate and principal-and-interest payment stay constant for the entire loan term. That predictability makes long-term budgeting straightforward. An adjustable-rate mortgage (ARM) starts with a fixed rate for an initial period, often five, seven, or ten years, and then resets periodically based on a market index plus a margin. ARMs typically offer a lower initial rate than a comparable fixed loan, which can make sense if you plan to sell or refinance before the first adjustment. The risk is that rates can rise substantially when the fixed period ends. To stress-test an ARM in this calculator, run the numbers at both the initial rate and a worst-case adjusted rate.

HOA dues and what they cover

Many condominiums, townhouses, and planned communities charge a monthly homeowners association fee. HOA dues fund shared amenities, exterior maintenance, building insurance (in condos), landscaping, and a reserve fund for major repairs. Dues vary widely, from under $50 per month in some single-family subdivisions to several hundred dollars per month in luxury condos or communities with extensive amenities. Lenders include HOA dues when calculating your debt-to-income ratio, so a high HOA fee directly reduces the loan amount you qualify for. Enter your estimated HOA dues in this calculator to see the full monthly cost you will be committing to.

Total interest and total cost over the loan

The total interest figure in this calculator is the sum of all interest charges over the full loan term, calculated as the monthly P&I payment times the number of payments, minus the loan amount. On a long-term mortgage, total interest often exceeds the original loan amount. The total cost of the loan adds the down payment back in, giving you the full amount you will pay to own the home outright at the end of the term, excluding property tax, insurance, maintenance, and closing costs. These figures are useful for comparing different loan scenarios, not as a reason to avoid homeownership, since owning also builds equity and provides housing stability.

What this calculator does not include

This calculator estimates the ongoing monthly payment and long-term costs, but it does not account for closing costs (typically 2 to 5 percent of the loan amount), points you might buy to lower your rate, origination fees, or any prepayment you make during the loan. It also uses a flat estimate for PMI rather than your lender's actual rate, which depends on your credit score, loan type, and insurer. For a binding cost estimate, request a Loan Estimate form from your lender within three business days of submitting a full mortgage application. Results from this calculator are estimates and should not be taken as financial advice.

How to use this calculator to set your home-buying budget

A practical way to use this tool is to start from a target monthly budget rather than a target home price. Decide the maximum total monthly payment you can comfortably afford, accounting for all your other obligations. Then work backward: enter a trial home price, your expected down payment, a realistic interest rate, and your estimated local property tax and insurance. Adjust the home price up or down until the total monthly output matches your budget. Many financial advisors suggest keeping housing costs below 28 percent of gross monthly income as a starting guideline, though the right number depends on your full financial picture, job stability, and future plans. Use this calculator to explore scenarios quickly before speaking with a lender who can give you a pre-approval based on your actual income and credit.