Mortgage Calculator
Calculate your full monthly payment — principal, interest, property tax, insurance and PMI — with a year-by-year amortization schedule.
Balance Over Time
Yearly Amortization
| Year | Principal | Interest | Balance |
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What Goes Into a Mortgage Payment?
For most homebuyers, the mortgage payment is the single largest line item in their monthly budget — and it's almost never just principal and interest. The full payment lenders call PITI typically includes four components, and depending on your situation two more. Understanding what each piece is and how it can change over time is the difference between a budget that holds together and one that collapses two years in.
- Principal — the portion that reduces the actual loan balance you owe.
- Interest — the cost of borrowing, calculated monthly on the remaining balance.
- Property Taxes — usually paid into an escrow account each month, then released annually or semi-annually to your local tax authority.
- Homeowner's Insurance — also typically escrowed, required by virtually every mortgage lender.
- PMI (Private Mortgage Insurance) — required when your down payment is less than 20% of the home's value. Typically 0.3% to 1.5% of the loan annually. Falls off automatically when you reach 78% loan-to-value.
- HOA Dues — for condos, townhomes, and many planned communities. Paid directly to the HOA, not the lender.
The Math Behind Your Monthly Payment
The principal-and-interest portion comes from the standard amortization formula:
M = P × [ r(1+r)n ] / [ (1+r)n − 1 ]
Where M is the monthly payment, P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12). It looks intimidating, but it's just compound interest worked in reverse — solving for the constant payment that exactly pays off the loan over n months.
Why Early Payments Are Almost All Interest
This is one of the most misunderstood aspects of how mortgages work. In year one of a 30-year mortgage, the overwhelming majority of each payment goes to interest, not principal — because interest is calculated on the (still very large) outstanding balance. As you slowly chip away at the principal, the interest portion shrinks and the principal portion grows, accelerating in the back half of the loan.
$320,000 loan, 6.5%, 30-year fixed
Your monthly P&I payment: $2,022. Total interest over 30 years: $408,000 — yes, more than the loan itself.
Breakdown of the very first monthly payment:
- Interest portion: $1,733 (86%)
- Principal portion: $289 (14%)
Fast-forward to month 240 (year 20):
- Interest portion: $789 (39%)
- Principal portion: $1,233 (61%)
This is exactly why selling a home after just 3-5 years usually means you've built almost no equity through payments alone. Whatever equity you have came from price appreciation — and the bulk of your payments went straight to the bank.
15-Year vs 30-Year — The Real Tradeoff
A 15-year mortgage typically carries a rate roughly 0.5–1.0 percentage points lower than a 30-year. The monthly payment is significantly higher, but total interest paid over the life of the loan is dramatically lower — often less than half. The comparison for a $320,000 loan:
| Loan Term | Rate | Monthly P&I | Total Interest |
|---|---|---|---|
| 30-year | 6.50% | $2,022 | $407,889 |
| 20-year | 6.25% | $2,339 | $241,329 |
| 15-year | 5.75% | $2,658 | $158,392 |
The 15-year option saves $250,000 in interest over the life of the loan compared to the 30-year. The catch: that $636 higher monthly payment has to come from somewhere — and over 15 years, that's $115,000 you can't put into retirement accounts, emergencies, or other goals. There's no universally correct answer; the right call depends on your other financial commitments and how much cash flow flexibility you need.
The Extra-Payment Hack
You don't have to commit to a 15-year mortgage to get most of the interest savings. Adding even one extra principal payment per year to a 30-year mortgage typically shaves 4-6 years off the term. Setting up biweekly payments (half the monthly amount every two weeks) automatically delivers 26 half-payments = 13 full payments per year, instead of 12 — same effect.
Example: On the $320,000 / 6.5% / 30-year loan above, adding $200 extra to principal each month pays off the loan in 22 years and 6 months instead of 30, and saves $117,000 in total interest. That's a guaranteed 6.5% return on every extra dollar you send in — better than most savings or bond yields.
Property Tax and Insurance Can Surprise You
Two things people consistently underestimate: property taxes can rise faster than your salary, especially in fast-growing areas, and insurance has been climbing 10-20% annually in many regions due to climate-related claims. Your "PITI" today is not a fixed number — the I and T pieces will probably grow. Run the calculator with property tax 30% higher than today's number as a stress test.
The 28/36 Affordability Rule
Lenders and financial planners often cite the 28/36 rule for housing affordability:
- 28% rule: Your total monthly housing payment (PITI + PMI + HOA) shouldn't exceed 28% of your gross monthly income.
- 36% rule: Your total monthly debt payments (housing + car + student loans + minimum credit card payments) shouldn't exceed 36% of gross income.
A household earning $120,000/year gross has $10,000/month in income — a maximum housing payment of $2,800 by this rule. Lenders may pre-approve you for higher amounts because they're optimizing for what you can pay, not what's sustainable. The difference often matters more than the rate you negotiate.
House-poor warning: Stretching to 35-40% of gross income on housing is the most common path to never having any money left for emergencies, retirement, vacations or unexpected repairs. The bank will lend it; that doesn't mean you should borrow it.
Refinancing Math
If rates drop substantially after you've taken out a mortgage, refinancing into a new loan at the lower rate can save money. The rule of thumb: a refinance makes sense if it saves at least 0.75-1% on your rate and you'll keep the loan long enough to recover the closing costs (typically 2-3% of the loan amount). Divide the closing costs by your monthly savings to get the break-even months — if you'll stay in the house longer than that, refi makes sense.
Common Buyer Mistakes
- Maxing out the pre-approval amount. Lenders pre-approve based on debt ratios, not your actual lifestyle costs. The pre-approval is a ceiling, not a target.
- Skipping inspection to win a bidding war. Saves $500 up front, can cost $50,000 in undetected issues. Almost never worth it.
- Ignoring property taxes when comparing homes. Two houses at the same price can have wildly different monthly costs because of school-district tax rates.
- Forgetting closing costs. 2-5% of the loan amount, paid at signing. On a $320k loan that's $6,400–$16,000 you need on top of your down payment.
- Underestimating maintenance. Budget 1% of home value per year for ongoing upkeep — sometimes more for older homes.
- Treating HOA dues as static. HOAs raise fees regularly and can pass special assessments for big projects. Read recent HOA financials before buying.
Frequently Asked Questions
How much house can I really afford?
The 28/36 rule is the standard answer: housing under 28% of gross income, total debt under 36%. A stricter version (sometimes called the "30% net" rule) keeps housing under 30% of take-home pay, which is more forgiving of high tax brackets and accounts for actual disposable income.
Should I put 20% down?
20% avoids PMI and gives you instant equity, but it isn't always the right move. If putting 20% down drains your emergency fund or prevents you from contributing to retirement, it's usually wiser to put 10-15% down, keep cash reserves, and accept the PMI cost — it falls off automatically once you reach 78% loan-to-value.
What's the difference between APR and interest rate?
The interest rate is the percentage you pay on the loan balance. APR (Annual Percentage Rate) wraps in lender fees, origination charges, mortgage insurance and points, then expresses everything as an effective annual rate. Always compare lenders by APR, not headline rate.
Are closing costs included in this calculator?
No. Closing costs are paid once at signing — typically 2-5% of the loan amount. Plan for them as a separate up-front expense on top of your down payment.
What about FHA, VA, or USDA loans?
This calculator handles conventional fixed-rate mortgages. FHA loans have different mortgage insurance rules (paid as MIP, lasts the life of the loan if down payment is under 10%). VA loans require no PMI for eligible veterans. USDA loans have geographic restrictions. The principal-and-interest math is identical; the insurance line differs.
Should I pay extra to principal or invest the money?
If your mortgage rate is 7% and you can earn 5% in a high-yield savings account or bond, extra payments win mathematically. If you're confident a diversified stock portfolio will return ~7% real over the long term, investing wins. Most people split the difference and do both.
What is escrow?
An escrow account is an account your lender maintains where you make monthly contributions toward property taxes and homeowner's insurance. The lender then pays those bills on your behalf when they come due. Most loans require escrow, especially if down payment is under 20%.
How does property tax get reassessed?
Most U.S. counties reassess every 1-5 years based on market value. Some states (California's Prop 13) cap annual increases regardless of market changes. Always look up your specific county's rules.