Mortgage Calculator
Calculate your monthly mortgage payment, see total interest costs, and explore how different loan terms affect your finances. Plan your home purchase with confidence.
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Understanding Your Mortgage
A mortgage is likely the largest financial commitment you'll make in your lifetime. Our mortgage calculator helps you understand the true cost of homeownership, including monthly payments, total interest paid, and how different loan terms impact your finances.
Key Mortgage Metrics Explained
Understanding these metrics is crucial for making informed decisions:
- Principal & Interest (P&I): The main components of your payment. Principal pays down the loan balance, while interest is the cost of borrowing. Early in your loan, most of your payment goes to interest.
- Property Taxes: Annual taxes paid to local government, typically 1-2% of your home's value. Collected monthly through escrow by most lenders.
- Homeowners Insurance: Required coverage protecting your home and the lender's investment. Costs vary based on location, home value, and coverage level.
- PMI (Private Mortgage Insurance): Required when down payment is less than 20%. Typically 0.5-1% of loan amount annually. Drops off once you reach 20% equity.
- Total Interest Paid: The cumulative interest you'll pay over the life of the loan. This can exceed your original loan amount on 30-year mortgages.
15-Year vs 30-Year Mortgage: Which is Right for You?
The choice between loan terms is one of the most important mortgage decisions:
30-Year Mortgage Advantages:
- Lower monthly payments provide more cash flow flexibility
- Easier to qualify for based on debt-to-income ratio
- Frees up money for other investments (retirement, education, etc.)
- Better for first-time buyers or those on tight budgets
15-Year Mortgage Advantages:
- Lower interest rates (typically 0.5-0.75% less than 30-year)
- Build equity much faster (half the time)
- Pay significantly less total interest (often 50-60% less)
- Own your home outright sooner
Example: A $300,000 loan at 7% for 30 years costs $418,527 in interest. The same loan at 6.5% for 15 years costs only $182,634 in interest—a savings of over $235,000. However, the 15-year monthly payment is significantly higher.
The Power of Extra Payments
Making additional principal payments can dramatically reduce your interest costs and loan term. Here's why it works:
- Extra payments directly reduce principal, lowering future interest calculations
- Each dollar of extra payment saves you multiple dollars in interest
- Front-loading extra payments has the most impact due to compound interest
- Even small additional payments ($50-100/month) can shave years off your mortgage
Pro tip: Making one extra mortgage payment per year (split across 12 months) can reduce a 30-year mortgage to about 25 years and save tens of thousands in interest.
How Much Home Can You Afford?
Lenders use several rules to determine affordability:
- 28% Front-End Ratio: Your housing costs (PITI) shouldn't exceed 28% of gross monthly income
- 36% Back-End Ratio: Total debt payments (including mortgage) shouldn't exceed 36% of gross monthly income
- Down Payment: At least 3-5% for conventional loans, though 20% avoids PMI
However, just because you qualify for a certain amount doesn't mean you should borrow that much. Consider your other financial goals, emergency fund, and lifestyle needs.
Understanding Amortization
Amortization is how your mortgage payment is split between principal and interest over time. Key insights:
- Early payments are mostly interest (70-80% in first years)
- The principal/interest ratio gradually reverses over time
- By the final years, payments are mostly principal
- This is why refinancing after many years can reset the clock and cost more interest
Frequently Asked Questions
How much should I put down on a home?
While 20% down avoids PMI and gets better rates, many successful buyers put down 3-5% through FHA or conventional loans. Consider your savings, emergency fund, and other financial goals. Sometimes keeping cash for renovations or investments makes sense even if it means paying PMI temporarily.
Should I pay points to lower my interest rate?
Paying points (1% of loan amount per point) can lower your rate by about 0.25%. This makes sense if you plan to stay in the home long enough to break even—typically 5-7 years. If you might move or refinance sooner, skip the points and keep your cash.
What's included in my monthly mortgage payment?
Most mortgage payments include PITI: Principal (loan paydown), Interest (lender's fee), Taxes (property taxes), and Insurance (homeowners insurance). If you put less than 20% down, add PMI. Some communities also have HOA fees collected separately.
How do I get rid of PMI?
PMI automatically drops off when you reach 22% equity through regular payments, or you can request removal at 20% equity. You can also eliminate PMI earlier by making extra principal payments or if your home appreciates significantly (requires a new appraisal). Refinancing is another option once you have 20% equity.
Is it better to pay off my mortgage or invest?
This depends on your interest rate and risk tolerance. If your mortgage rate is 3-4%, investing likely offers better long-term returns (7-10% historically). At 6%+, paying down the mortgage provides a guaranteed "return" equal to your rate. Many people do both: pay a bit extra on the mortgage while also investing for retirement.
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