Mortgage Calculator
Calculate your monthly payment, total interest, and full amortization schedule for any home loan.
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Get your monthly payment, total cost, and full amortization schedule.
Understanding Your Mortgage
A mortgage is a loan secured by real property. Understanding how mortgage payments work helps you make smarter decisions about how much to borrow, which term to choose, and when to consider refinancing. The monthly payment you see here consists of principal (reducing your loan balance) and interest (the lender's fee for providing the loan).
How Mortgage Payments Are Calculated
Monthly mortgage payments are calculated using the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n – 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments.
The key insight is that early payments go mostly toward interest, while later payments shift increasingly toward principal. In the first month of a 30-year $320,000 mortgage at 6.5%, about $1,733 of your $2,023 payment goes to interest — only $290 reduces your actual debt. By year 20, the split has reversed and more goes to principal than interest.
💡 The 28% Rule
Most lenders recommend that your total housing payment (mortgage + property tax + insurance) should not exceed 28% of your gross monthly income. For a $120,000 annual salary ($10,000/month), this means keeping housing costs under $2,800/month. Use this as a guardrail when deciding how much home you can comfortably afford.
The True Cost: 15-Year vs 30-Year Mortgage
A 15-year mortgage carries a higher monthly payment but dramatically reduces total interest paid. On a $320,000 loan at 6.5%: a 30-year term costs about $728,000 total ($408,000 in interest), while a 15-year term costs about $501,000 total ($181,000 in interest) — a savings of $227,000. However, the higher monthly payment (~$2,790 vs ~$2,023) may strain your budget. The "right" choice depends on your cash flow, career trajectory, and other financial priorities.
Down Payment: How Much Should You Put Down?
A 20% down payment avoids Private Mortgage Insurance (PMI), which costs 0.5–1.5% of the loan annually. On a $400,000 home, PMI could add $2,000–$6,000 per year to your costs. However, tying up more cash in a down payment means less available for investments or emergencies. Many first-time buyers use programs allowing 3–5% down with FHA loans. Run the numbers both ways — sometimes a smaller down payment and investing the difference produces better outcomes, depending on your expected investment returns versus PMI cost.
Extra Payments: The Fastest Way to Build Equity
Making even one extra mortgage payment per year dramatically reduces your payoff timeline. On a $320,000, 30-year mortgage at 6.5%, one extra monthly payment per year reduces the payoff to about 25 years and saves approximately $56,000 in interest. Some homeowners apply raises, bonuses, or tax refunds directly to principal. Before doing this, check whether your mortgage has prepayment penalties (most modern US mortgages do not).
When Does Refinancing Make Sense?
Refinancing replaces your existing mortgage with a new one at a different rate or term. The classic rule of thumb: refinancing makes sense if you can reduce your interest rate by at least 1% and plan to stay in the home long enough to recoup closing costs (typically 2–5% of the loan amount, or $6,400–$16,000 on a $320,000 loan). Calculate your break-even point: divide closing costs by your monthly savings. If break-even is 24 months and you plan to stay 5+ years, refinancing likely makes financial sense.
Property Taxes and Insurance: The "PITI" Payment
Your real monthly housing cost is PITI: Principal + Interest + Taxes + Insurance. This calculator includes optional property tax and insurance fields to show your true monthly cost. Property tax rates vary enormously by location — from under 0.3% in some states to over 2.5% in others. Most lenders require homeowner's insurance and collect these costs monthly through an escrow account, paying the bills on your behalf annually.
Frequently Asked Questions
Most financial experts suggest keeping your total monthly housing costs (mortgage + taxes + insurance) below 28–30% of your gross monthly income, and total debt payments (housing + car + student loans) below 36–43%. Use the 28% rule as your starting point: multiply your gross annual income by 0.28, divide by 12, then use this calculator to find the home price that generates that monthly payment. Don't forget to account for closing costs (2–5% of purchase price) and an emergency fund for maintenance (typically 1% of home value per year).
Private Mortgage Insurance (PMI) is required by most lenders when your down payment is less than 20% of the home's purchase price. It protects the lender — not you — if you default. PMI typically costs 0.5–1.5% of the loan amount annually, or roughly $100–$300/month on a $320,000 loan. You can avoid PMI by: (1) making a 20% down payment, (2) using a "piggyback" 80-10-10 loan structure, or (3) choosing a lender-paid PMI program. Under the Homeowners Protection Act, you can request PMI cancellation once you reach 20% equity, and it must be automatically cancelled at 22% equity.
Fixed-rate mortgages lock your interest rate for the entire loan term, giving you predictable payments and protection against rate increases. They're the right choice if you plan to stay in the home long-term or if you expect rates to rise. Adjustable-rate mortgages (ARMs) start with a lower fixed rate for an initial period (3, 5, 7, or 10 years), then adjust annually. They can save money if you plan to sell or refinance before the adjustment period, or if you expect rates to fall. In a high-rate environment, ARMs can be appealing, but they carry rate risk — your payment could increase substantially after the initial period.
Yes, with minor adjustments. Change the currency to £ or CA$. Note that Canadian mortgages are amortized over a 25-year standard period with rates semi-annually compounded (not monthly), so there may be a small difference in the exact payment. UK mortgages are typically on 25-year terms with monthly compounding, similar to this calculator. Australian mortgages follow the same calculation method — just select AU$ and use your relevant rate. For precise figures, confirm with your lender, as local regulations may create small variations.