Mortgage & Escrow Calculator
Loan Details
Escrow Details (Annual)
Your Estimated Monthly Payments
Estimated Principal & Interest (P&I) Payment:
$0.00Estimated Monthly Escrow Payment:
$0.00Estimated Total Monthly Payment (P&I + Escrow):
$0.00Total Paid Over Loan Term:
$0.00Total Interest Paid Over Loan Term:
$0.00Understanding Your Mortgage and Escrow Payments
When you take out a mortgage to buy a home, your monthly payment typically consists of two main components: Principal & Interest (P&I) and Escrow. This calculator helps you estimate both, providing a clearer picture of your total housing cost.
1. Principal & Interest (P&I)
This is the core part of your mortgage payment that goes towards paying down the loan balance and covering the lender's interest. The formula for calculating the fixed monthly P&I payment is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
M= Your total monthly mortgage payment (Principal & Interest)P= The principal loan amount (the amount you borrowed)i= Your monthly interest rate (annual rate divided by 12)n= The total number of payments over the loan's lifetime (loan term in years multiplied by 12)
For example, if you borrow $300,000 at an annual interest rate of 3.5% for 30 years:
P= $300,000- Annual interest rate = 3.5%, so monthly rate
i= 0.035 / 12 ≈ 0.00291667 - Loan term = 30 years, so total payments
n= 30 * 12 = 360
Plugging these into the formula results in an estimated monthly P&I payment of approximately $1,347.07.
2. Escrow Account
An escrow account is a special account managed by your mortgage lender to pay property-related expenses on your behalf. These typically include:
- Property Taxes
- Homeowner's Insurance
- Private Mortgage Insurance (PMI), if applicable (usually for down payments less than 20%)
- Sometimes, other costs like flood insurance or HOA dues
Your lender estimates these annual costs, divides them by 12, and adds that amount to your monthly P&I payment. This collected amount is then held in the escrow account and disbursed when the bills are due. This ensures you have the funds readily available and don't miss payments, which could lead to penalties or even foreclosure.
The calculation for the monthly escrow payment is straightforward:
Monthly Escrow = (Annual Property Tax + Annual Home Insurance + Annual PMI + Other Annual Escrow Costs) / 12
Using the example values provided in the calculator:
- Annual Property Tax = $3,600
- Annual Home Insurance = $1,200
- Annual PMI = $720
- Other Annual Escrow = $200
Total Annual Escrow Costs = $3600 + $1200 + $720 + $200 = $5,720
Estimated Monthly Escrow Payment = $5,720 / 12 ≈ $476.67.
Total Monthly Payment
Your total monthly housing expense is the sum of your P&I payment and your monthly escrow payment.
Total Monthly Payment = P&I Payment + Monthly Escrow Payment
In our example, the total estimated monthly payment would be approximately $1,347.07 (P&I) + $476.67 (Escrow) = $1,823.74.
Important Considerations:
- Adjustments: Property taxes and insurance premiums can increase over time. Lenders typically review your escrow account annually and may adjust your monthly payment to reflect these changes.
- Escrow Shortages: If the actual costs of taxes and insurance are higher than anticipated, you might face an escrow shortage, requiring you to pay extra to replenish the account.
- Lender Fees: This calculator does not include potential lender fees, origination fees, or private mortgage insurance (PMI) if your down payment is less than 20%.
- Estimates: All figures are estimates. Your actual loan terms and escrow costs may vary. Always consult with your lender and insurance providers for precise figures.
Using this calculator can help you budget more effectively and understand the full financial commitment of homeownership.