What this mortgage calculator works out
A mortgage payment quoted by a lender is usually just principal and interest. The amount that actually leaves your account each month is larger, because most lenders also collect property tax and home insurance into an escrow account, some homes carry association dues, and buyers with less than 20% down pay private mortgage insurance. This calculator adds all of those up so the headline number is the one your budget has to absorb, then shows how the loan itself unwinds month by month.
At a glance
- The headline is the full monthly outlay: principal, interest, tax, insurance, HOA and PMI.
- PMI applies below 20% down and drops off once the balance reaches 80% of the price.
- Total cost of ownership, not the loan payment, is the figure to compare with renting.
- A shorter term raises the payment and cuts total interest sharply.
Start with the home price, how much you are putting down (as a percentage or an amount), the interest rate and the term. Add the yearly property tax as a percentage of the price, the yearly insurance premium and any monthly HOA dues. If your down payment is under 20%, enter a PMI rate, 0.5% of the loan per year is typical; anywhere from 0.3% to 1.5% is possible depending on credit score and down payment.
The principal and interest formula
P&I = L × r ÷ (1 − (1 + r)^−n)
This is the same amortisation formula used for any fixed-rate loan. It produces a level payment such that, after n payments, the balance is exactly zero. Each month's interest is the current balance multiplied by the monthly rate; whatever is left of the payment reduces the balance.
Worked example: the default mortgage
$400,000 home, 20% down ($80,000), so the loan is $320,000 at 6.5% for 30 years.
Monthly rate: 6.5% ÷ 12 = 0.54167%. Payments: 360.
P&I = 320,000 × 0.0054167 ÷ (1 − 1.0054167−360) = $2,022.62.
Property tax at 1.2% of $400,000 is $4,800 a year, or $400 a month. Insurance of $1,500 a year is $125 a month. No HOA and no PMI (20% down). Total monthly payment: 2,022.62 + 400 + 125 = $2,547.62.
Over 30 years the interest alone comes to about $408,142, more than the amount borrowed.
Down payment, loan-to-value and PMI
Loan-to-value (LTV) is the loan divided by the price. Twenty percent down gives 80% LTV, the threshold below which lenders do not require mortgage insurance. PMI protects the lender, not you, and it is priced as a yearly percentage of the loan, paid monthly.
Worked example: 10% down
Same $400,000 home with 10% down: the loan is $360,000, LTV 90%.
P&I rises to $2,275.44. PMI at 0.5% of $360,000 is $1,800 a year, or $150 a month.
The balance falls to 80% of the price ($320,000) after 95 payments, so PMI is charged for 95 months, about $14,250 in total, and then drops off. The calculator shows this as "includes $150 PMI for 7 yrs 11 mos" under the headline.
Under the US Homeowners Protection Act you can ask the lender to cancel PMI once the balance reaches 80% of the original value, and it must cancel automatically at 78%. Paying extra principal brings both dates forward; the calculator recalculates the PMI end month when you add an extra payment.
Reading the breakdown and the schedule
The donut shows how a single month's payment splits between the loan and the other costs. On a typical 30-year mortgage, principal and interest is around three-quarters of the total; tax and insurance make up most of the rest.
The stacked area chart and the schedule show the loan over time. In the early years most of each payment is interest; the crossover point, where principal overtakes interest within the payment, arrives around year 17 of a 30-year loan at 6.5%. That is why selling or refinancing in the first few years builds little equity from payments alone.
Two totals are worth comparing:
- Total interest is the cost of borrowing, what you pay above the amount you borrowed.
- Total cost of ownership adds tax, insurance, HOA and PMI over the life of the loan. It is the figure to compare against renting, and it is usually 40 to 60% larger than the interest figure.
Fifteen or thirty years?
A shorter term means a higher payment and far less interest. On the $320,000 loan at 6.5%, a 15-year term costs about $2,787 a month for principal and interest but saves roughly $226,000 in total interest against the 30-year loan. Fifteen-year rates are also usually a quarter to half a point lower than 30-year rates, which widens the gap further. Use the term buttons to compare, and remember that a 30-year loan with voluntary extra payments gives you the same saving with the flexibility to stop if money gets tight.
| Term | Principal and interest | Total interest ($320,000 at 6.5%) |
|---|---|---|
| 15 years | $2,787.54 | $181,758 |
| 20 years | $2,385.83 | $252,601 |
| 30 years | $2,022.62 | $408,141 |
What the calculator leaves out
- Closing costs: typically 2 to 5% of the price, paid at closing, not part of the monthly payment.
- Rate changes: the rate is fixed for the whole term. For an adjustable-rate mortgage, run the calculator at the start rate and at the cap.
- Escrow cushions: lenders may collect a one- or two-month buffer of tax and insurance; the monthly figures here are the straight yearly amounts divided by twelve.
- Tax assessments: property tax is a percentage of the purchase price; your assessed value and local rates will change over time.
- Maintenance and utilities: budget separately, often 1 to 2% of the home's value a year for upkeep.
Using the result
The total monthly payment is the number to test against your budget; lenders will also compare it to your gross income when they calculate your debt-to-income ratio. Total interest is the number for comparing loans with different rates and terms. If two quotes have different fees, ask each lender for the APR, it folds most fees into a single comparable rate, and enter that here for a fairer comparison.