Mortgage Calculator

Your monthly mortgage payment is calculated using the loan amount, interest rate, and loan term. The formula accounts for the amortization of the loan, meaning early payments are mostly interest while later payments are mostly principal. Additional costs like property tax, insurance, and HOA fees are added to get your total monthly payment.

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. PMI protects the lender if you default on the loan. Once you have 20% equity in your home, you can typically request to cancel PMI.

A shorter loan term means higher monthly payments but less total interest paid. A 15-year mortgage typically has lower interest rates than a 30-year mortgage, and you will pay significantly less interest over the life of the loan.

This calculator focuses on your monthly housing payment. It does not include closing costs (typically 2-5% of loan amount), moving expenses, furniture, repairs, or ongoing maintenance costs. These should be factored into your home buying budget separately.

A common guideline is that your total monthly housing payment should not exceed 28% of your gross monthly income (the "front-end ratio"). Your total debt payments including the mortgage should not exceed 36% of gross income (the "back-end ratio").

Putting down 20% avoids PMI and reduces your monthly payment. However, it is not always necessary. Some loans allow as little as 3% down. Consider your savings, emergency fund, and whether you could invest the difference for potentially higher returns.

Amortization is the process of paying off a loan through regular payments over time. Each payment is split between interest and principal. Early in the loan, most of your payment goes toward interest. As you pay down the principal, more of each payment goes toward reducing the loan balance.

You can lower your monthly payment by: making a larger down payment, choosing a longer loan term, shopping for a lower interest rate, or buying a less expensive home. Refinancing later when rates drop is another option.