Total Interest: $0.00
Total Cost of Loan: $0.00
Calculator Use
The loan calculator mortgage tool is designed to provide home buyers and homeowners with a clear understanding of their potential monthly financial obligations. By entering basic property and loan information, you can instantly see how much your monthly principal and interest payments will be. This tool is essential for budgeting and determining how much house you can truly afford.
Unlike basic calculators, this specific mortgage tool accounts for the relationship between your down payment and the total interest paid over the life of the loan. You can use it to compare different scenarios, such as a 15-year term versus a 30-year term, or to see how a larger down payment reduces your monthly burden.
- Home Price
- The total purchase price of the property before any down payments or taxes.
- Down Payment
- The initial amount of cash you pay upfront. A higher down payment reduces the loan amount and often lowers the interest rate.
- Loan Term
- The duration of the loan in years. Standard mortgage terms are 15, 20, or 30 years.
- Interest Rate
- The annual interest rate charged by the lender for borrowing the money.
How It Works
When you use a loan calculator mortgage, the math is based on a standard amortization formula. Amortization is the process of paying off a debt over time through regular installments. In the early years of a mortgage, a larger portion of your payment goes toward interest. As the balance decreases, more of your payment is applied to the principal.
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M: Total monthly payment
- P: Principal loan amount (Home Price – Down Payment)
- i: Monthly interest rate (Annual Rate / 12 months)
- n: Number of months (Loan Term in years × 12)
Calculation Example
Example: Imagine you are purchasing a home for $400,000 with a 20% down payment ($80,000) and have secured a 30-year fixed interest rate of 7%.
Step-by-step solution:
- Principal (P): $400,000 – $80,000 = $320,000
- Monthly Interest (i): 0.07 / 12 = 0.0058333
- Number of Payments (n): 30 × 12 = 360
- Calculate M: $320,000 [ 0.0058333(1.0058333)^360 ] / [ (1.0058333)^360 – 1 ]
- Result: Monthly Payment = $2,128.97
Common Questions
Does this calculator include property taxes and insurance?
This loan calculator mortgage specifically calculates the Principal and Interest (P&I). While property taxes, homeowners insurance, and private mortgage insurance (PMI) are often paid monthly into an escrow account, they vary significantly by location and provider. You should add approximately 1-2% of the home's value annually to estimate these additional costs.
How does the down payment affect my loan?
A larger down payment reduces the principal amount you need to borrow. Not only does this lower your monthly payment, but it also reduces the total interest you will pay over the life of the loan. Furthermore, if you put down 20% or more, you typically avoid paying Private Mortgage Insurance (PMI).
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage usually offers a lower interest rate and results in significantly less interest paid overall. However, the monthly payments are much higher. A 30-year mortgage offers lower monthly payments, providing more flexibility in your monthly budget, but you will pay more in interest over the long term. Use the loan calculator mortgage to compare both monthly costs and total interest for both options.