*Estimates only. Does not include HOA fees or PMI.
Understanding Your Mortgage Payment
Purchasing a home is likely the largest financial decision you will ever make. Understanding how your monthly mortgage payment is calculated is crucial for budgeting and long-term financial planning. This Mortgage Payment Calculator helps you break down the costs associated with homeownership, ensuring you aren't caught off guard by hidden expenses.
The 4 Pillars of a Mortgage Payment (PITI)
Most mortgages consist of four main components, often referred to by the acronym PITI:
Principal: This is the money that goes directly towards paying down the loan balance. Initially, a small portion of your payment goes to principal, but this amount increases over time.
Interest: This is the cost of borrowing money. In the early years of a mortgage, the majority of your payment goes toward interest.
Taxes: Property taxes are assessed by your local government to fund public services. Lenders often collect this monthly and hold it in an escrow account to pay the bill when it's due.
Insurance: Homeowners insurance protects your property against damage. Like taxes, this is often divided into monthly payments and held in escrow.
How Interest Rates Affect Your Buying Power
Even a small difference in interest rates can have a massive impact on your monthly payment and the total cost of your loan. For example, on a $300,000 loan, the difference between a 6% and a 7% interest rate can mean paying hundreds more per month and tens of thousands more over the life of the loan.
Fixed vs. Adjustable Rates
Fixed-Rate Mortgages: The interest rate remains the same for the entire life of the loan (usually 15 or 30 years). This offers stability as your principal and interest payment will never change.
Adjustable-Rate Mortgages (ARMs): The rate is fixed for an initial period (e.g., 5 or 7 years) and then fluctuates based on market conditions. These can offer lower initial rates but carry the risk of payments increasing significantly later.
Strategies to Lower Your Monthly Payment
If the calculated monthly payment is higher than your budget allows, consider these strategies:
Increase Your Down Payment: Putting more money down reduces the loan amount (Principal), which directly lowers your monthly obligation and total interest costs.
Improve Your Credit Score: Borrowers with higher credit scores generally qualify for lower interest rates.
Shop for Insurance: Homeowners insurance rates vary by provider. Shopping around can save you hundreds of dollars a year.
Consider a Longer Term: While a 15-year mortgage saves on interest, a 30-year term spreads payments out longer, resulting in a lower monthly bill.
What is PMI?
If your down payment is less than 20% of the home's value, lenders usually require Private Mortgage Insurance (PMI). This protects the lender if you default. This calculator does not automatically include PMI, but generally, it costs between 0.5% and 1% of the entire loan amount on an annual basis. Once you reach 20% equity in your home, you can request to have PMI removed.
function calculateMortgage() {
// 1. Get Input Values by ID
var homePrice = parseFloat(document.getElementById('homePrice').value);
var downPayment = parseFloat(document.getElementById('downPayment').value);
var loanTermYears = parseFloat(document.getElementById('loanTerm').value);
var interestRateAnnual = parseFloat(document.getElementById('interestRate').value);
var propertyTaxAnnual = parseFloat(document.getElementById('propertyTax').value);
var homeInsuranceAnnual = parseFloat(document.getElementById('homeInsurance').value);
// 2. Validate Inputs
if (isNaN(homePrice) || homePrice < 0) homePrice = 0;
if (isNaN(downPayment) || downPayment < 0) downPayment = 0;
if (isNaN(loanTermYears) || loanTermYears <= 0) loanTermYears = 30;
if (isNaN(interestRateAnnual) || interestRateAnnual < 0) interestRateAnnual = 0;
if (isNaN(propertyTaxAnnual) || propertyTaxAnnual < 0) propertyTaxAnnual = 0;
if (isNaN(homeInsuranceAnnual) || homeInsuranceAnnual < 0) homeInsuranceAnnual = 0;
// 3. Core Calculation Logic
// Principal Loan Amount
var principal = homePrice – downPayment;
// If down payment is greater than home price, principal is 0
if (principal < 0) principal = 0;
var monthlyInterestRate = interestRateAnnual / 100 / 12;
var numberOfPayments = loanTermYears * 12;
var monthlyPrincipalInterest = 0;
// Amortization Formula: M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
if (interestRateAnnual === 0) {
monthlyPrincipalInterest = principal / numberOfPayments;
} else {
monthlyPrincipalInterest = principal *
(monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) /
(Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
}
// Calculate Escrow (Tax + Insurance)
var monthlyTax = propertyTaxAnnual / 12;
var monthlyInsurance = homeInsuranceAnnual / 12;
var monthlyEscrow = monthlyTax + monthlyInsurance;
// Total Monthly Payment
var totalMonthlyPayment = monthlyPrincipalInterest + monthlyEscrow;
// Total Interest over Life of Loan
var totalRepayment = monthlyPrincipalInterest * numberOfPayments;
var totalInterest = totalRepayment – principal;
// 4. Update UI with formatted numbers
document.getElementById('resPrincipalInterest').innerHTML = formatCurrency(monthlyPrincipalInterest);
document.getElementById('resTaxInsurance').innerHTML = formatCurrency(monthlyEscrow);
document.getElementById('resTotalMonthly').innerHTML = formatCurrency(totalMonthlyPayment);
document.getElementById('resTotalInterest').innerHTML = formatCurrency(totalInterest);
// Show results area
document.getElementById('results-area').style.display = 'block';
}
// Helper function for currency formatting
function formatCurrency(num) {
return '$' + num.toFixed(2).replace(/\d(?=(\d{3})+\.)/g, '$&,');
}