How is my monthly mortgage payment calculated?

Your monthly mortgage payment is calculated using the loan amount (home price minus down payment), interest rate, and loan term. The formula uses the principal and interest calculation: M = P[r(1+r)^n]/[(1+r)^n-1], where M is monthly payment, P is principal, r is monthly interest rate, and n is number of payments. Additional costs like property tax, insurance, and PMI are added to get your total monthly payment.

What is PMI and when do I need to pay it?

PMI (Private Mortgage Insurance) is required when you make a down payment of less than 20% of the home's purchase price. PMI protects the lender if you default on the loan. Once you build 20% equity in your home, you can typically request to cancel PMI. PMI usually costs between 0.5% to 1% of the loan amount annually.

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage has higher monthly payments but significantly lower total interest paid over the life of the loan. A 30-year mortgage has lower monthly payments but you'll pay more interest overall. Choose based on your budget, financial goals, and how long you plan to stay in the home. Use our calculator to compare both options.

What percentage down payment should I make?

A 20% down payment is ideal as it avoids PMI, gets better interest rates, and lowers your monthly payment. However, many buyers put down 3-10% depending on the loan type. FHA loans allow as little as 3.5% down. Consider your savings, other financial goals, and whether you can afford a larger down payment without depleting your emergency fund.

What other costs should I budget for besides the mortgage payment?

Beyond your mortgage payment (principal, interest, taxes, insurance), budget for home maintenance (1-2% of home value annually), utilities, HOA fees if applicable, and closing costs (2-5% of purchase price). Also maintain an emergency fund for unexpected repairs like roof, HVAC, or plumbing issues.

Free Mortgage Calculator - Calculate Monthly Mortgage Payments Online

Home Price

Down Payment

20% down payment avoids PMI

Interest Rate (Annual %)

Loan Term

Property Tax (Annual) Annual property tax amount

Home Insurance (Annual) Annual homeowners insurance premium

Understanding Your Mortgage

What is a Mortgage?
A mortgage is a loan used to purchase real estate, where the property serves as collateral. Your monthly payment typically includes principal (loan repayment), interest, property taxes, and homeowners insurance (PITI).

How Amortization Works:
In the early years of your mortgage, a larger portion of your payment goes toward interest. Over time, more goes toward principal. This is called amortization. Making extra principal payments can significantly reduce total interest paid.

Fixed vs Adjustable Rate:
Fixed-rate mortgages maintain the same interest rate throughout the loan term, providing payment stability. Adjustable-rate mortgages (ARMs) have rates that change periodically, which can mean lower initial payments but uncertainty later.

Important Tips:
• Aim for a 20% down payment to avoid PMI and get better rates
• Consider shorter loan terms (15-20 years) to save on interest
• Factor in all costs: maintenance, HOA fees, utilities
• Get pre-approved before house hunting
• Shop around and compare rates from multiple lenders

Why Use This Calculator?

Budget Planning:

Determine what you can afford before shopping for homes

Compare Options:

See how different rates, terms, and down payments affect your payment

Long-term Planning:

Understand total interest paid and plan for refinancing opportunities

ToolEra

Mortgage Calculator

Loan Summary

Understanding Your Mortgage

Why Use This Calculator?

Your Favorites