Estimate your monthly payments and total interest costs.
30 Years
20 Years
15 Years
10 Years
Estimated Monthly Payment: $0.00
Principal & Interest
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Loan Amount
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Total Interest Paid
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Total Cost of Loan
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Understanding Your Mortgage Calculation
Buying a home is one of the most significant financial decisions you will make in your lifetime. Understanding how your mortgage payment is calculated is crucial for budgeting and long-term financial planning. This mortgage calculator helps you estimate your monthly payments by considering the principal loan amount, interest rate, and loan term, along with additional costs like property taxes and homeowners insurance.
Key Factors That Affect Your Mortgage Payment
Several variables contribute to the final amount you pay each month. Adjusting any of these in the calculator above will show you how sensitive your monthly budget is to changes in the market or your down payment.
Home Price & Down Payment: The difference between the home price and your down payment is your Principal Loan Amount. A larger down payment reduces the principal, leading to lower monthly payments and less interest paid over the life of the loan.
Interest Rate: This is the cost of borrowing money from a lender, expressed as a percentage. Even a small difference of 0.5% can save or cost you tens of thousands of dollars over a 30-year term. Rates fluctuate based on the economy and your personal credit score.
Loan Term: The most common terms are 15 and 30 years. A 30-year loan spreads payments out longer, resulting in a lower monthly bill but significantly higher total interest costs. A 15-year loan has higher monthly payments but builds equity faster.
Property Taxes & Insurance: Lenders often collect 1/12th of your annual property tax and homeowners insurance bills each month along with your mortgage payment. These funds are held in an escrow account to pay the bills when they are due.
How the Math Works
The standard formula used to calculate the monthly principal and interest payment is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
M = Total monthly payment
P = The principal loan amount
i = Monthly interest rate (Annual rate divided by 12)
n = Number of months required to repay the loan
Why Use a Mortgage Calculator?
Before you start house hunting, it is essential to determine "how much house" you can afford. A mortgage calculator allows you to test different scenarios. For example, you can see if you can afford a more expensive home if interest rates drop, or how much you could save by increasing your down payment by $10,000. It empowers you to enter negotiations with lenders and real estate agents with confidence.
Additional Costs to Consider
While this calculator provides a robust estimate of your PITI (Principal, Interest, Taxes, and Insurance), remember to budget for other costs associated with homeownership:
PMI (Private Mortgage Insurance): If your down payment is less than 20%, lenders usually require PMI, which can add 0.5% to 1% of the loan amount to your annual costs.
HOA Fees: If you are buying a condo or a home in a planned community, you may have monthly Homeowners Association fees.
Maintenance: It is generally recommended to budget 1% of your home's value annually for repairs and maintenance.
Use the calculator above to start your journey toward homeownership with clarity and financial security.