Mortgage Calculator

About the Mortgage Calculator

What Is a Mortgage?

A mortgage is a loan specifically used to purchase real estate. Unlike a personal loan or auto loan, a mortgage is secured by the property itself — if you stop making payments, the lender can foreclose and take the home. Most mortgages in the United States are 15-year or 30-year fixed-rate loans, though adjustable-rate mortgages (ARMs) are also common. Your monthly payment typically includes four components, known by the acronym PITI: Principal (the loan balance you're paying down), Interest (the cost of borrowing), Taxes (property taxes), and Insurance (homeowners insurance). Our calculator accounts for all four.

How This Calculator Works

This tool first subtracts your down payment from the home price to determine the loan amount. It then applies the standard amortization formula to calculate your monthly principal and interest payment. Property taxes and homeowners insurance are annual figures that get divided by 12 and added to the PI payment, giving you the full PITI — your actual monthly housing cost. The calculator also generates a year-by-year amortization schedule showing how much of each year's payments go toward principal versus interest and how your remaining balance declines over time. In the early years of a mortgage, the vast majority of each payment goes to interest; by the final years, nearly all of it goes to principal. This schedule makes that shift visible.

Common Use Cases

Home shopping: Before you start touring houses, use this calculator to figure out what price range keeps your monthly payment comfortable. Lenders may approve you for more than you should actually spend — running the numbers yourself keeps you grounded. Refinancing: If rates drop, plug in your current balance, the new rate, and your remaining term to see if refinancing saves enough to justify the closing costs. PMI planning: If your down payment is less than 20%, lenders typically require Private Mortgage Insurance. Add that cost to your calculations manually or look for a PMI-specific calculator. Comparing loan offers: Run the calculator with different rates and terms from different lenders to see the true long-term cost difference.

Tips and Best Practices

Aim for 20% down: Putting 20% down avoids PMI entirely and gives you instant equity. On a $400,000 home, that's $80,000 — a lot of money, but it can save you $100–300 per month in PMI premiums for years.

15-year vs. 30-year: A 15-year mortgage has higher monthly payments but saves enormous amounts of interest. On a $300,000 loan at 6.5%, the 30-year total interest is roughly $383,000; the 15-year total interest is about $171,000 — less than half. If you can afford the higher payment, a 15-year term is a wealth-building machine.

Don't forget closing costs: Closing costs typically run 2–5% of the home price and are paid at closing. Factor them into your cash-on-hand calculation so you're not caught short.

Tax and insurance aren't fixed: Property taxes can rise as your home appreciates, and insurance premiums can increase after claims or in disaster-prone areas. Your PITI payment today may be higher in five years.

Frequently Asked Questions

What's the difference between pre-qualified and pre-approved? Pre-qualification is an informal estimate based on self-reported finances. Pre-approval involves verifying your income, assets, and credit and carries far more weight with sellers. Always get pre-approved before making an offer.

What is an escrow account? Many lenders require an escrow account where they collect a portion of your property taxes and insurance with each mortgage payment and pay those bills on your behalf when they come due. This protects the lender's interest in the property and simplifies budgeting for you.

Should I pay points to lower my rate? Mortgage points are upfront fees (1 point = 1% of the loan amount) that buy down your interest rate. They make sense if you plan to stay in the home long enough for the monthly savings to exceed the upfront cost. Use this calculator to run both scenarios and compare.