Mortgage Calculator
Estimate your monthly payments, including taxes and insurance.
Comprehensive Mortgage Payment Calculator
Buying a home is one of the most significant financial decisions you will ever make. Understanding your potential monthly payments is crucial to ensuring your new home fits comfortably within your budget. Our **Mortgage Calculator** goes beyond simple principal and interest calculations to include property taxes and home insurance, giving you a realistic picture of your monthly housing costs.
How Your Mortgage Payment is Calculated
While the total amount you pay each month stays relatively consistent with a fixed-rate mortgage, that single payment is actually composed of four distinct parts, often referred to as PITI:
- Principal: This is the portion of your payment that goes directly toward paying down the loan balance (Home Price minus Down Payment).
- Interest: This is the fee the lender charges for loaning you the money. In the early years of your loan, the majority of your payment goes toward interest.
- Taxes: Property taxes are assessed by your local government. Lenders typically collect a portion of this annually estimated cost every month and hold it in an escrow account.
- Insurance: Homeowners insurance protects your property against damage. Like taxes, this is usually paid annually but collected monthly by your lender.
The Mortgage Formula Explained
Calculating the principal and interest (P&I) portion of your mortgage involves a specific amortization formula. If you are curious about the math running behind this calculator, here is the standard formula used by lenders:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
- M = Total monthly payment (Principal + Interest)
- P = The principal loan amount (Home Price – Down Payment)
- i = Your monthly interest rate (Annual Rate / 12)
- n = Total number of payments (Loan Years × 12)
How Interest Rates Affect Your Payment
Even a small difference in interest rates can have a massive impact on your monthly payment and the total cost of your loan over time. For example, on a $300,000 loan, the difference between a 6% and a 7% interest rate is roughly $200 per month. Over the life of a 30-year loan, that 1% difference costs you an extra $72,000.
Tips for Lowering Your Mortgage Payment
- Increase Your Down Payment: Putting more money down reduces the principal loan amount, which lowers your monthly obligation and instant equity.
- Improve Your Credit Score: A higher credit score often qualifies you for lower interest rates.
- Shop Around: Different lenders offer different rates and closing costs. Always compare at least three quotes.
- Consider a Shorter Term: While a 15-year loan has higher monthly payments than a 30-year loan, the interest rate is usually lower, and you will pay significantly less interest total.
Frequently Asked Questions
Does this calculator include PMI?
This specific calculator focuses on PITI (Principal, Interest, Taxes, and Insurance). If your down payment is less than 20% of the home price, your lender will likely require Private Mortgage Insurance (PMI), which typically costs between 0.5% and 1% of the loan amount annually. You should add roughly $30-$70 per month for every $100,000 borrowed if you are putting down less than 20%.
What is an escrow account?
An escrow account is a holding account managed by your lender. When you pay your monthly mortgage, the lender splits the money. The principal and interest stay with the lender, while the tax and insurance portions are deposited into the escrow account. When your tax and insurance bills are due, the lender pays them on your behalf using these funds.