Mortgage Calculator
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Understanding Your Mortgage
A mortgage is a significant financial commitment. This calculator helps you break down the costs associated with a home loan, giving you a clear picture of your monthly payments and the total cost over the life of the loan.
The Mortgage Payment Formula (P&I)
The core of your mortgage payment, the Principal and Interest (P&I), is calculated using a standard formula:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
- M = Your monthly mortgage payment
- P = The principal loan amount (home price minus down payment)
- i = Your monthly interest rate (annual rate divided by 12)
- n = The number of payments over the loan’s lifetime (years multiplied by 12)
Your total monthly payment, often called PITI, includes Principal, Interest, Taxes, and Insurance. This calculator also accounts for PMI and HOA fees for a complete estimate.
15-Year vs. 30-Year Mortgage
Choosing a loan term is a major decision. While a 30-year mortgage offers lower monthly payments, a 15-year mortgage allows you to pay off your loan faster and save a substantial amount in interest.
| Feature | 15-Year Mortgage | 30-Year Mortgage |
|---|---|---|
| Monthly Payment | Higher | Lower |
| Total Interest Paid | Significantly Lower | Significantly Higher |
| Equity Building | Faster | Slower |
| Interest Rates | Typically Lower | Typically Higher |
Frequently Asked Questions (FAQ)
What is a good mortgage interest rate?
A 'good' mortgage rate is relative and depends on the current market, your credit score, loan type, and down payment. Generally, a good rate is one that is at or below the current market average for a borrower with your financial profile. It's best to get quotes from multiple lenders.
How much house can I afford?
Lenders typically use the 28/36 rule. Your total housing payment (PITI) should not exceed 28% of your gross monthly income, and your total debt payments (including housing, car loans, credit cards) should not exceed 36%. Our calculator helps you understand the monthly cost, which is a key part of affordability.
What is PMI (Private Mortgage Insurance)?
PMI is a type of insurance required by lenders for conventional loans when the down payment is less than 20% of the home's purchase price. It protects the lender if you default on the loan. This calculator automatically adds an estimated PMI cost if your down payment is below 20% and shows when it's projected to be removed.
What are closing costs?
Closing costs are fees paid at the closing of a real estate transaction. They typically range from 2% to 5% of the loan amount and can include appraisal fees, title insurance, attorney fees, and loan origination fees. While not an input in this calculator for simplicity, remember to budget for them separately.
Does making extra payments help?
Yes, absolutely. Making extra payments, even small ones, goes directly toward the loan's principal balance. This helps you build equity faster, pay off your loan sooner, and save a significant amount of money on total interest paid over the life of the loan. Use the 'Extra Monthly Payment' field in our calculator to see the impact.
