How this mortgage calculator works
The principal and interest part of your payment comes from the standard amortization formula: M = P × r(1+r)n / ((1+r)n − 1), where P is the loan amount, r is the monthly interest rate (the annual rate divided by 12) and n is the number of monthly payments. The calculator then adds one twelfth of your yearly property tax and home insurance, plus any monthly HOA fee, to show what you would actually pay each month.
What is included in a monthly mortgage payment?
- Principal: the part that reduces the amount you owe.
- Interest: what the lender charges for the loan. Early payments are mostly interest.
- Property tax and insurance: often collected by the lender in an escrow account.
- HOA fees: paid to a homeowners association, if the property has one.
- PMI: private mortgage insurance, usually required when the down payment is under 20%.
Why extra payments matter
Every extra dollar you pay goes directly to principal. Because interest is calculated on the remaining balance, a smaller balance means less interest every month after that. Over a long loan the effect is large, which is why even a modest extra amount can remove years from a 30-year mortgage. Check with your lender that extra payments are applied to principal and that there is no prepayment penalty.
Choosing a loan term
A shorter term such as 15 years has a higher monthly payment but a lower interest rate in many cases and far less total interest. A 30-year term keeps the payment lower and gives more flexibility. Try both in the calculator and compare the total interest figure.
Frequently asked questions
How is a monthly mortgage payment calculated?
Principal and interest use the amortization formula M = P x r(1+r)^n / ((1+r)^n - 1). Property tax, insurance and HOA fees are added on top as monthly amounts.
How much house can I afford?
A common guideline is the 28/36 rule: housing costs at or below about 28% of gross monthly income, and total debt payments at or below about 36%. Lenders look at your credit, savings and other debts too.
Do extra payments really save money?
Yes. Extra payments reduce the principal sooner, so less interest builds up on the balance. The earlier in the loan you pay extra, the bigger the savings.
What is PMI and when can I remove it?
Private mortgage insurance protects the lender when your down payment is under 20%. On many conventional loans it can be removed once your loan balance falls to about 80% of the home's original value. Ask your lender about the exact rules.