Mortgage Calculator

How the mortgage calculator works

Your monthly mortgage payment has two parts. The first is principal and interest, which pays down the loan. The second is the cost of owning the home that most lenders collect with each payment: property tax, homeowners insurance and, when your down payment is small, mortgage insurance. Lenders call the total PITI, short for principal, interest, taxes and insurance.

Principal and interest use the standard loan formula:

Payment = L × r × (1 + r)ⁿ ÷ [(1 + r)ⁿ − 1]

• L is the loan amount: the home price minus your down payment.
• r is the monthly interest rate, which is the yearly rate divided by 12.
• n is the number of monthly payments, such as 360 for a 30-year loan.

Example

Take a $400,000 home with 20% down. The loan is $320,000. At 6.5% for 30 years, principal and interest come to $2,022.62 a month. Add property tax at 1% of the home price a year ($333.33 a month) and $1,800 a year of insurance ($150.00 a month), and the total is about $2,505.95 a month.

Over the full 30 years you would pay about $408,142 in interest, which is more than the original loan. Interest is front-loaded: in the first years most of each payment goes to interest, and only later does the balance fall quickly.

What extra payments do

An extra payment goes straight to principal, so you stop paying interest on that part of the balance. Adding $200 a month to the loan above pays it off in 23 years, 5 months instead of 30 years and saves about $105,429 in interest. Enter an amount in the extra payment box to try your own number. Check with your loan servicer that extra money is applied to principal and that your loan has no prepayment penalty.

Down payment and PMI

If you put down less than 20% on a conventional loan, lenders usually charge private mortgage insurance (PMI). It often costs roughly 0.3% to 1.5% of the loan a year, depending on your credit score and down payment. On most conventional loans PMI can be removed once you reach 20% equity, and it ends automatically at 22% equity if you are current on payments. FHA loans use a different type of mortgage insurance with its own rules, so treat the PMI line as a rough guide for those.

Property tax and insurance vary by location

Property tax rates differ a lot between states and even between neighboring counties, and insurance costs depend on the home, its location and your coverage. Use the figures from the listing, your county assessor or an insurance quote for the most accurate result.

This is an estimate. Your lender's loan estimate will show your exact rate, fees and closing costs. Closing costs, changes in tax or insurance over time and adjustable rates are not included.