Mortgage Calculator

How a mortgage calculator works

A mortgage payment is built from several pieces. The largest is usually principal and interest, which comes from the standard amortization formula applied to your loan amount, interest rate, and term. On top of that, most lenders collect property taxes and hazard insurance through an escrow account, and many borrowers also pay HOA dues and, with a down payment under 20 percent, private mortgage insurance. Adding all of those together gives the real monthly payment you need to budget for.

Principal and interest: the amortization formula

Each month you pay a fixed amount of principal and interest. Early in the loan, most of that payment is interest because the balance is still large. As the balance shrinks, the interest portion falls and the principal portion rises, even though the total stays the same. That is why the amortization schedule is so useful: it shows exactly how slowly the principal drops in the first few years and how it accelerates near the end.

Taxes, insurance, and HOA

Property taxes are set by your local assessor and vary widely by location, often between 0.5 and 2.5 percent of home value per year. Hazard insurance covers damage to the structure and usually runs a few hundred to a couple of thousand dollars a year. HOA dues apply in some communities and cover shared amenities and maintenance. Enter the annual figures and the calculator divides them into monthly amounts for you.

Private mortgage insurance (PMI)

If your down payment is less than 20 percent of the home price, lenders typically require PMI, which protects the lender (not you) if you default. This calculator applies PMI when your loan-to-value ratio is above 80 percent and estimates the cost as a yearly percentage of the loan balance. Once you build 20 percent equity you can usually request to have PMI removed, which lowers your payment.

Term: the biggest lever besides rate

A 30 year term keeps the monthly payment low but you pay interest for three decades, often pushing total interest close to the original loan amount. A 15 year term raises the monthly payment substantially but can cut total interest by more than half. Use the amortization schedule to compare: the same loan at 30 vs 15 years shows very different interest columns even when the rate is only slightly lower on the shorter term.

What this calculator does not include

• Closing costs, discount points, and origination fees, which are paid upfront or rolled into the loan.
• Adjustable rate mortgages, where the rate changes after an initial fixed period.
• Property tax reassessments after a purchase, which can raise your escrow payment.
• Special assessments, flood insurance, or mortgage payoff acceleration.

Use this tool to compare scenarios: a larger down payment to drop PMI, a 15 year vs 30 year term, or a lower rate from a different lender. Small changes in rate and term compound into large differences in total interest over the life of the loan.