What is a mortgage calculator?

A mortgage calculator is a financial tool that helps you estimate your monthly mortgage payment based on factors like loan amount, interest rate, loan term, property taxes, and insurance. It also shows you the total interest you'll pay over the life of the loan.

How is my monthly mortgage payment calculated?

Your monthly payment is calculated using the formula: M = P[r(1+r)^n/((1+r)^n)-1)], where P is the principal loan amount, r is the monthly interest rate (annual rate divided by 12), and n is the number of payments (loan term in years × 12). Additional costs like property tax, insurance, and HOA fees are added to get your total payment.

What is amortization?

Amortization is the process of spreading out a loan into fixed payments over time. In the early years of a mortgage, most of your payment goes toward interest. As time passes, more of each payment goes toward the principal balance. An amortization schedule shows this breakdown for each payment.

How much should I put down?

A 20% down payment is often recommended because it helps you avoid Private Mortgage Insurance (PMI) and results in lower monthly payments. However, many loans allow lower down payments: FHA loans as low as 3.5%, conventional loans as low as 3%, and VA/USDA loans may offer 0% down for eligible borrowers.

Should I make extra payments on my mortgage?

Making extra payments toward your principal can save you thousands in interest and help you pay off your mortgage years earlier. Even small extra payments can make a big difference over time. However, consider paying off higher-interest debt or maximizing retirement contributions first.

What's included in my monthly payment?

Your total monthly payment (PITIA) typically includes:

• Principal: Amount going toward your loan balance
• Interest: Cost of borrowing money
• Taxes: Property taxes (often escrowed)
• Insurance: Homeowners insurance
• HOA: Homeowners association fees (if applicable)

What is PMI and how can I avoid it?

Private Mortgage Insurance (PMI) is required when your down payment is less than 20%. It typically costs 0.5% to 1% of the loan amount annually. You can avoid PMI by making a 20% down payment, or request to remove it once you reach 20% equity.

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage has higher payments but lower rates and saves significantly on interest. A 30-year mortgage offers flexibility with lower required payments. Choose 15-year if you can afford it; choose 30-year for flexibility—you can always make extra payments.