Mortgage Calculator
What is a Mortgage Calculator?
A Mortgage Calculator is an essential tool for anyone looking to buy a home or refinance an existing loan. It helps you estimate your exact monthly home loan payments by breaking down the complex costs of principal, interest, property taxes, and homeowners insurance. By providing a clear picture of your monthly financial commitment, this tool ensures you don't buy a house that stretches your budget too thin.
When you take out a mortgage, your monthly payment is rarely just the loan amount divided by the number of months. Lenders use an amortization schedule where your early payments are heavily weighted toward interest, and later payments go mostly toward the principal. Furthermore, most lenders require you to pay your property taxes and home insurance through an escrow account, which is added to your monthly bill. Our calculator factors all of this in automatically.
How to Use This Mortgage Calculator
To get the most accurate estimate of your future house payment, follow these steps:
- Home Price: Enter the total purchase price of the property you want to buy.
- Down Payment: Enter the amount of cash you are putting down upfront. A standard down payment is 20%, but many loans allow 3%, 5%, or 10% down.
- Interest Rate: Enter the annual interest rate offered by your lender. Even a 0.5% difference can save or cost you tens of thousands of dollars over 30 years.
- Loan Term: Enter the duration of the loan in years. The most common terms are 15-year and 30-year fixed-rate mortgages.
- Property Tax (Optional): Enter your estimated annual property taxes. This varies wildly by state and county, so check local tax rates.
- Home Insurance (Optional): Enter your estimated annual homeowners insurance premium.
- Calculate: Click the button to see your complete monthly payment breakdown, including P&I (Principal & Interest) and Escrow (Taxes & Insurance).
Mortgage Calculator with Taxes and Insurance
When asking "how much house can I afford", it's critical to use a mortgage calculator with taxes and insurance included. Many basic calculators only show the principal and interest (P&I), which can be dangerously misleading. Property taxes and homeowners insurance (often held in an escrow account) can add hundreds of dollars to your true monthly payment. Whether you are looking at a conventional loan, using an FHA loan mortgage calculator, or a VA loan mortgage calculator, always factor in these additional costs to ensure you don't become "house poor."
Frequently Asked Questions
A standard monthly mortgage payment is often referred to as PITI, which stands for Principal, Interest, Taxes, and Insurance. Principal is the money used to pay down the balance of the loan; Interest is the charge paid to the lender for the privilege of borrowing the money; Taxes refer to the property taxes assessed by your local government; and Insurance refers to homeowners insurance (and sometimes Private Mortgage Insurance or PMI if your down payment is less than 20%).
A larger down payment has three massive benefits: First, it reduces the principal amount you need to borrow, which lowers your monthly payments. Second, it decreases the total interest you will pay over the life of the loan. Third, if you put down 20% or more, you can avoid paying Private Mortgage Insurance (PMI), which can save you hundreds of dollars every month.
A 30-year mortgage offers lower monthly payments, giving you more breathing room in your budget, but you will pay significantly more in total interest over the life of the loan. A 15-year mortgage has higher monthly payments, but it usually comes with a lower interest rate, and you will own your home free and clear in half the time, saving you a massive amount of money on interest.
An amortization schedule is a complete table of periodic loan payments, showing the amount of principal and the amount of interest that comprise each payment until the loan is paid off at the end of its term. In the first few years of a mortgage, the vast majority of your payment goes toward interest. Toward the end of the loan, the majority goes toward principal.