Mortgage Calculator

How to Use This Mortgage Calculator

Enter your home price and down payment — either as a dollar amount or percentage, and the calculator will keep both in sync. Then set your interest rate and loan term. The calculator instantly shows your monthly principal and interest payment, adds property taxes and homeowners insurance divided into monthly escrow amounts, and calculates PMI automatically if your down payment is below 20%.

The three optional housing cost fields — property taxes, homeowners insurance, and HOA — let you build a complete picture of monthly housing costs. For property taxes, use your county assessor's estimate or the national average of roughly 1% of home value per year. For homeowners insurance, typical policies run $1,000–$2,000 per year depending on home size and location. HOA fees apply to condos, townhomes, and some planned communities.

The amortization schedule(click “Show Amortization Schedule”) breaks down each year's principal reduction, interest cost, PMI payments, and remaining balance. If your down payment is under 20%, the calculator also identifies the exact month and year when PMI ends — giving you a concrete date to look forward to.

What Is a Mortgage?

A mortgage is a loan secured by real property — your home serves as collateral for the debt. If you stop making payments, the lender can foreclose and take ownership of the property to recover the outstanding loan balance. In exchange for this security, mortgages typically offer lower interest rates than unsecured credit such as personal loans or credit cards.

Most residential mortgages in the United States are fully amortizing fixed-rate loans, meaning you make equal monthly payments for the entire loan term and the loan balance reaches zero at the end. Each monthly payment covers the interest that accrued since the last payment, with the remainder reducing the principal. In the early years, most of each payment goes to interest; in the later years, most goes to principal. This is why paying a little extra early in the loan saves a disproportionate amount of total interest.

The federal government plays a large role in the US mortgage market through agencies like Fannie Mae, Freddie Mac, the FHA, VA, and USDA. These agencies purchase or guarantee mortgages from lenders, which allows lenders to offer loans they might not otherwise make and keeps interest rates lower than they would be in a purely private market.

Breaking Down Your Monthly Payment: PITI

The acronym PITI describes the four components that typically make up a monthly mortgage payment. Understanding each helps you compare loan offers accurately and budget realistically for homeownership.

Principal

Principal is the portion of your monthly payment that reduces the outstanding loan balance. In the first month of a 30-year mortgage at 7%, only about 17% of your payment goes to principal — the rest is interest. By year 20, the split has reversed and over half of each payment reduces the principal. This shift is what makes extra payments so powerful early in the loan term.

Interest

Interest is the lender's fee for providing the loan, calculated each month as the current loan balance multiplied by the monthly interest rate. Because the balance decreases over time, so does the interest portion of each payment. The total interest on a $300,000 30-year mortgage at 7% is over $418,000 — meaning you effectively pay for the home twice over the life of the loan.

Taxes

Property taxes are levied by local governments and typically run 0.5% to 2% of the assessed home value per year, though rates vary enormously by state and county. New Jersey has an effective rate around 2.2%, while Hawaii is below 0.3%. Most lenders collect one-twelfth of your annual tax bill with each mortgage payment, hold it in escrow, and pay the tax authority directly when the bill is due. You do not pay your lender for taxes — they are paid to your local government.

Insurance

Homeowners insurance protects your property against fire, theft, weather damage, and liability claims. Most lenders require it and collect the annual premium in monthly escrow installments. Average premiums range from $1,000 to $2,500 per year for a single-family home, depending on location, construction type, coverage limits, and deductible. Flood insurance and earthquake insurance are typically separate policies not included in standard homeowners coverage.

Private Mortgage Insurance (PMI) Explained

PMI is an insurance policy that protects the lender — not you — against losses if you default on the loan before building sufficient equity. Lenders require it on conventional loans when the down payment is less than 20%, because statistical default risk rises significantly below that threshold.

PMI premiums typically range from 0.5% to 1.5% of the loan amount per year, paid monthly. On a $300,000 loan, that's $1,500 to $4,500 per year — or $125 to $375 per month added to your payment. This calculator uses 1% annually as a reasonable middle estimate. Your actual PMI rate depends on your credit score, down payment percentage, loan type, and insurer.

Under the Homeowners Protection Act of 1998, lenders must automatically cancel PMI when your loan balance reaches 78% of the original purchase price, based on the scheduled amortization (not accelerated payoff). You can proactively request cancellation when your balance reaches 80% — you may need a current appraisal confirming the home value hasn't declined. PMI is also automatically terminated at the midpoint of the loan term regardless of LTV.

If you have an FHA loan, the equivalent is called MIP (Mortgage Insurance Premium), which operates differently: it includes an upfront premium (1.75% of the loan) plus annual premiums. For FHA loans with less than 10% down originated after June 2013, MIP lasts for the life of the loan — a significant long-term cost that often makes a conventional loan with PMI cheaper, even with a slightly higher rate.

15-Year vs. 30-Year Mortgage: Which Is Right for You?

The loan term is one of the most consequential decisions in the mortgage process. The 30-year mortgage is the dominant choice in the US because of its lower monthly payment, but the 15-year comes with significant financial advantages.

Consider a $300,000 mortgage at typical rates (let's use 7% for 30-year and 6.5% for 15-year, reflecting the typical rate premium for longer terms):

The 15-year costs $617 more per month but saves nearly $250,000 in interest. However, that assumes you make the minimum 30-year payment for the full term. An alternative strategy: take the 30-year mortgage but make extra principal payments each month. This gives you flexibility — you're not locked into the higher payment if your income drops — while still paying down the loan faster when you can.

Choose the 15-year if: your income is stable and comfortable well above the payment, you're buying close to retirement and want the home paid off, or you have no other high-interest debt to pay down first. Choose the 30-year if: you're earlier in your career with income growth expected, you value cash flow flexibility, you have higher-interest debt, or you plan to invest the monthly difference in the stock market (a strategy that can outperform the interest savings in favorable markets).

How Much House Can You Afford?

Lenders use two debt-to-income (DTI) ratios to evaluate mortgage applications. The front-end ratio (also called the housing ratio) is your total PITI payment divided by gross monthly income. Most conventional lenders cap this at 28–31%. The back-end ratio is total monthly debt payments (PITI plus all other debt obligations like car loans, student loans, and credit card minimums) divided by gross income. The conventional limit is typically 36–43%, though some loan programs allow higher.

Here's a quick rule of thumb for home price relative to income: most financial advisors suggest keeping the home price to 2.5–3× your annual gross income. At higher income levels or in low-rate environments this can stretch to 4×, while in high-rate environments staying below 2.5× is prudent.

These are guidelines, not rules. Your actual affordability depends on credit score (which affects your interest rate), existing debts, local property tax and insurance rates, HOA fees, and your personal financial goals. Many buyers in expensive markets must exceed the 28% rule to buy anything at all. The key is to model the actual total monthly cost — using this calculator — against your budget with a margin for maintenance, savings, and life events.

Beyond monthly payments, consider upfront costs: down payment, closing costs (typically 2–5% of the purchase price), moving expenses, and immediate repairs. For a $350,000 home with 10% down, you might need $35,000 (down payment) + $7,000–$17,500 (closing costs) + $3,000–$10,000 (moving, repairs, furnishing) = $45,000–$62,500 in cash before you get the keys.

Fixed-Rate vs. Adjustable-Rate Mortgages

This calculator models a fixed-rate mortgage — the interest rate and monthly P&I payment stay constant for the full loan term. That predictability makes fixed rates the overwhelmingly popular choice in the US, particularly for long loan terms.

An adjustable-rate mortgage (ARM)starts with a fixed rate for an initial period (typically 5, 7, or 10 years) and then adjusts annually based on a benchmark index (usually SOFR, which replaced LIBOR). ARMs are described as “5/1,” “7/1,” or “10/1” — the first number is the fixed period in years, the second is how often it adjusts after that. ARMs have rate caps (periodic and lifetime) that limit how much the rate can change at each adjustment and over the life of the loan.

ARMs can make sense if: you plan to sell or refinance before the fixed period ends, the initial rate discount is substantial (1–2% or more), or you expect rates to fall over your holding period. For primary residences with long expected holding periods in uncertain rate environments, fixed rates are generally the safer choice.

Mortgage Points: Buying Down Your Rate

Mortgage points (also called discount points) are an upfront fee paid to the lender in exchange for a lower interest rate. One point equals 1% of the loan amount — on a $300,000 loan, one point costs $3,000. Typically, one point reduces the interest rate by 0.25%, though this varies by lender and market conditions.

To determine whether paying points makes sense, calculate the break-even period: divide the upfront cost of the points by the monthly savings from the lower rate. For example, if one point costs $3,000 and reduces your monthly payment by $50, the break-even is 60 months (5 years). If you plan to stay in the home longer than 5 years, buying the point makes financial sense. If you might move or refinance sooner, paying points is likely not worth it.

Origination points are different from discount points — they are a lender processing fee, not a rate-buydown. Ask lenders to clarify whether points are discount or origination fees when comparing loan estimates.

Frequently Asked Questions