Mortgage Calculator
Calculate your monthly mortgage payment, total interest cost, and view a full year-by-year amortization schedule. Enter your home price, down payment, interest rate, and loan term to get started.
How Does a Mortgage Work?
A mortgage is a secured loan where a lender provides funds to purchase real estate, and the property itself serves as collateral. Unlike an unsecured personal loan, a mortgage gives the lender the legal right to foreclose — take ownership of the property — if you stop making payments. This security is why mortgages typically carry much lower interest rates than unsecured debt.
When you take out a mortgage, you agree to repay the loan plus interest over a defined term (typically 15 or 30 years in the US) through fixed monthly payments. Each payment covers that month's interest charge and reduces the outstanding principal. Because interest is calculated on the remaining balance, the interest portion shrinks every month while the principal portion grows — a process called amortization.
The Mortgage Payment Formula
For a fixed-rate mortgage, every monthly payment (M) is equal throughout the entire loan term:
M = P × [r(1+r)^n] / [(1+r)^n – 1]
| Variable | Meaning | Example |
|---|---|---|
| M | Monthly payment | Solving for this |
| P | Principal (home price minus down payment) | $300,000 |
| r | Monthly interest rate (annual rate ÷ 12) | 6.5% → 0.5417% |
| n | Total monthly payments (years × 12) | 30 yrs → 360 |
Full worked example: $300,000 loan at 6.5% for 30 years. r = 0.065/12 = 0.005417. (1+r)^n = (1.005417)^360 = 6.848. M = 300,000 × [0.005417 × 6.848] / [6.848 – 1] = 300,000 × 0.037098 / 5.848 = 300,000 × 0.006321 = $1,896/month. Total paid over 30 years: $682,560. Total interest: $382,560 — more than the original loan.
Amortization: How Your Payments Split Over Time
On that same $300,000 mortgage at 6.5%:
| Payment month | Interest portion | Principal portion | Remaining balance |
|---|---|---|---|
| Month 1 | $1,625 | $271 | $299,729 |
| Month 12 | $1,608 | $288 | $296,791 |
| Month 60 (year 5) | $1,544 | $352 | $284,470 |
| Month 120 (year 10) | $1,453 | $443 | $267,769 |
| Month 180 (year 15) | $1,325 | $571 | $243,820 |
| Month 240 (year 20) | $1,143 | $753 | $209,521 |
| Month 300 (year 25) | $869 | $1,027 | $159,288 |
| Month 360 (year 30) | $10 | $1,886 | $0 |
After 5 years of payments (60 months × $1,896 = $113,760 paid), you have only paid down $15,530 of principal — 86% of every payment has been interest. This is not a design flaw; it is mathematical. The interest is high early because the balance is high. As balance falls, interest falls, and principal repayment accelerates dramatically in the final years.
Down Payment: How Much Should You Put Down?
Your down payment directly determines your loan size, monthly payment, and whether you pay Private Mortgage Insurance (PMI). Here are the key thresholds:
| Down payment % | On a $400,000 home | Loan amount | PMI required? | Approx monthly PMI |
|---|---|---|---|---|
| 3% (FHA minimum) | $12,000 | $388,000 | Yes | $162–$485/mo |
| 5% | $20,000 | $380,000 | Yes | $159–$475/mo |
| 10% | $40,000 | $360,000 | Yes | $150–$375/mo |
| 20% | $80,000 | $320,000 | No | $0 |
| 25% | $100,000 | $300,000 | No | $0 |
PMI typically costs 0.5%–1.5% of the loan amount annually. On a $380,000 loan, that is $1,900–$5,700/year ($158–$475/month) — on top of your P&I payment. You can request PMI cancellation once your equity reaches 20% through payments or appreciation. Lenders must automatically cancel it at 22% equity based on the original amortization schedule.
30-Year vs 15-Year Mortgage: The Real Tradeoff
| Comparison | 30-Year at 6.75% | 15-Year at 6.25% | Difference |
|---|---|---|---|
| Loan amount | $300,000 | $300,000 | — |
| Monthly P&I | $1,946 | $2,573 | +$627/month |
| Total paid | $700,440 | $463,140 | Save $237,300 |
| Total interest | $400,440 | $163,140 | Save $237,300 |
| Equity after 5 years | ~$18,000 | ~$68,000 | +$50,000 |
The 15-year saves $237,300 in interest — a substantial sum. But the higher payment ($627/month more) may price some buyers out of the home they want, or leave insufficient cash flow for emergencies and investing. Many financial planners suggest a 30-year mortgage with intentional extra payments — you get the flexibility of the lower required payment, and can accelerate payoff when cash flow allows.
Interest Rates and Their Impact
Mortgage rates are the most-watched numbers in housing — and for good reason. Even a 1% difference in rate has a massive impact on monthly payments and total cost:
| Rate | Monthly payment ($300k, 30yr) | Total interest paid |
|---|---|---|
| 4.0% | $1,432 | $215,609 |
| 5.0% | $1,610 | $279,767 |
| 6.0% | $1,799 | $347,515 |
| 6.5% | $1,896 | $382,560 |
| 7.0% | $1,996 | $418,527 |
| 7.5% | $2,098 | $455,267 |
| 8.0% | $2,201 | $492,508 |
Going from 4% to 7% increases monthly payment by $564 and total interest by $202,918 on the same $300,000 loan. This is why timing and credit score matter so much. A credit score of 760+ typically qualifies for rates 0.5%–1.0% lower than a score of 620–639 — saving potentially $80,000–$150,000 over the life of a 30-year loan.
The True Monthly Cost of Homeownership: PITI + More
The acronym PITI captures the four components of a mortgage payment: Principal, Interest, Taxes, and Insurance. But total homeownership costs go further:
- Principal & Interest (P&I) — Your mortgage payment, calculated by this calculator
- Property taxes — Collected monthly into escrow, paid annually. National average: ~1.1% of home value/year ($3,300/year on a $300,000 home)
- Homeowner's insurance — Typically $1,000–$2,000/year depending on location and home size
- PMI — Required if down payment <20%. Typically $50–$400/month
- HOA fees — If in a homeowner's association. Can range from $50 to $500+/month
- Maintenance and repairs — Budget 1%–2% of home value annually. A $300,000 home: $3,000–$6,000/year for repairs, HVAC maintenance, roof replacement reserves, etc.
On a $300,000 home with a $240,000 mortgage at 6.5%: P&I = $1,517, taxes = $275, insurance = $125, PMI = $125 (if <20% down) — a PITI of $2,042. Add $250/month for maintenance reserves and the true all-in monthly cost is approximately $2,292. Lenders typically require PITI to be no more than 28% of gross monthly income.
Extra Payments: How Much Can You Save?
Any payment above the required monthly amount reduces your principal immediately, cutting future interest charges and shortening the loan term. The earlier in the loan you make extra payments, the greater the impact:
| Extra monthly payment | Years saved (30yr, $300k, 6.5%) | Interest saved |
|---|---|---|
| $0 | — | — |
| $50/month | ~2.3 years | ~$37,000 |
| $100/month | ~4.5 years | ~$67,000 |
| $200/month | ~7.8 years | ~$109,000 |
| One extra payment/year | ~4 years | ~$58,000 |
| Bi-weekly (26 half-payments) | ~4.5 years | ~$65,000 |
Mortgage Types: Fixed vs Adjustable Rate
Fixed-rate mortgage (FRM): The interest rate is locked for the entire loan term. Monthly P&I payments never change. Predictable, but you are locked into the rate even if rates fall (refinancing required to take advantage of lower rates).
Adjustable-rate mortgage (ARM): Rate is fixed for an initial period (typically 3, 5, 7, or 10 years), then adjusts annually based on a benchmark index (usually SOFR). A 5/1 ARM is fixed for 5 years, then adjusts every year. Initial rates are usually lower than fixed rates — but carry interest rate risk after the fixed period ends. ARMs make sense primarily if you plan to sell or refinance before the adjustment period begins.
Lenders use two ratios to assess affordability. Front-end ratio: your monthly PITI should not exceed 28% of gross monthly income. Back-end ratio: all monthly debt payments (mortgage + car + student loans + credit cards) should not exceed 36% of gross income. On $7,000/month gross income: max housing = $1,960; max all debts = $2,520. Some lenders allow higher ratios (up to 45% back-end) for strong borrowers, but staying under 36% gives you more financial flexibility and buffer for unexpected expenses.
Frequently Asked Questions
How is a mortgage payment calculated?
Fixed-rate mortgage payments use the formula M = P × [r(1+r)^n] / [(1+r)^n – 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of payments (years × 12). This formula produces a constant payment that covers monthly interest and reduces principal, fully retiring the debt at the end of the term.
What is the difference between principal and interest?
Principal is the portion of your payment that reduces your loan balance. Interest is the cost of borrowing that month, calculated as: remaining balance × monthly rate. In the early years, most of each payment is interest (on a 30-year mortgage at 6.5%, only 14% of your first payment is principal). The split gradually shifts until the final payment, which is almost entirely principal.
What credit score do I need to get a mortgage?
Conventional loans (Fannie Mae/Freddie Mac) require a minimum score of 620, but scores below 740 typically come with higher rates or extra fees. FHA loans accept scores as low as 580 (with 3.5% down) or 500 (with 10% down). VA and USDA loans have no official minimums but most lenders want 620+. The difference in rate between a 620 score and a 760+ score can cost or save $100,000+ over a 30-year loan.
What is an escrow account?
Escrow is a third-party account managed by your lender that collects and pays property taxes and insurance on your behalf. Each monthly payment includes 1/12 of your annual property tax and insurance premiums into escrow. The lender pays the bills when they come due. This protects the lender's collateral (your home) from tax liens or lapses in insurance coverage. Most conventional loans require escrow; some lenders waive it for borrowers with 20%+ equity and strong credit.
When should I refinance my mortgage?
Refinancing makes sense when: (1) current rates are at least 0.75%–1.0% below your existing rate, (2) you plan to stay in the home long enough to recoup closing costs (typically 2–3% of the loan amount, or $6,000–$9,000 on a $300,000 loan), and (3) you are not too far into the loan term (refinancing resets amortization, so you start paying mostly interest again). Break-even period = closing costs ÷ monthly payment reduction. If closing costs are $6,000 and refinancing saves $200/month, break-even is 30 months.
What is PMI and how do I get rid of it?
Private Mortgage Insurance (PMI) protects the lender if you default. Required when down payment is less than 20%. Typically costs 0.5%–1.5% of the loan amount annually. You can request cancellation when your loan-to-value ratio (LTV) reaches 80%—either through payments alone or through a combination of payments and home appreciation (which may require an appraisal). Under the federal Homeowners Protection Act, lenders must automatically cancel PMI when LTV reaches 78% based on the original amortization schedule.