Calculator Use
Our mortgage calculator is designed to help homebuyers and homeowners estimate their monthly financial obligations when purchasing property. By entering key financial variables, you can determine how much your monthly principal and interest (P&I) will be, and how property taxes and insurance impact your total budget.
Whether you are considering a first-time home purchase or looking to refinance your current home, this tool provides a clear breakdown of costs based on today's interest rates and your specific loan details.
- Loan Amount
- The total amount of money you intend to borrow. This is typically the home price minus your down payment.
- Interest Rate
- The annual percentage rate (APR) charged by the lender. Our calculator uses this to determine the cost of borrowing over the life of the loan.
- Loan Term
- The duration of the loan in years. Standard terms include 15, 20, and 30 years.
- Yearly Tax/Insurance
- The combined annual cost of property taxes and homeowners insurance. These are often collected in an escrow account and paid monthly.
How It Works
The mortgage calculator uses a standard amortization formula to solve for the monthly payment. This formula ensures that over the duration of the loan, the principal is reduced to zero while interest is paid based on the remaining balance.
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M: Total monthly principal and interest payment
- P: Principal loan amount
- i: Monthly interest rate (Annual rate divided by 12)
- n: Number of monthly payments (Years multiplied by 12)
Calculation Example
Example: A homebuyer is purchasing a $375,000 home with a 20% down payment ($75,000), resulting in a loan amount of $300,000. They secure a 30-year fixed rate at 6.5%.
Step-by-step solution:
- Loan Principal (P) = $300,000
- Monthly Interest (i) = 0.065 / 12 = 0.00541667
- Total Months (n) = 30 * 12 = 360
- Calculate P&I: 300,000 * [0.00541667(1.00541667)^360] / [(1.00541667)^360 – 1]
- Principal & Interest Result = $1,896.20
- If yearly taxes/insurance are $4,800, add $400 monthly.
- Total Monthly Payment = $2,296.20
Common Questions
Does the mortgage calculator include PMI?
Private Mortgage Insurance (PMI) is typically required if your down payment is less than 20%. While this basic tool doesn't have a separate field for PMI, you can add your estimated PMI amount to the "Yearly Tax/Ins" field to see how it affects your total monthly cash flow.
What is the difference between fixed and variable rates?
A fixed-rate mortgage maintains the same interest rate for the entire life of the loan, ensuring your P&I payment never changes. An Adjustable-Rate Mortgage (ARM) may start with a lower rate that fluctuates after an initial period based on market indexes.
How does the loan term affect my payment?
A shorter term (like 15 years) results in higher monthly payments but significantly lower total interest paid over time. A 30-year term offers lower monthly payments but results in much higher interest costs over the life of the loan.