How This Mortgage Calculator Works
A mortgage payment has up to four parts, often abbreviated PITI: Principal, Interest, property Taxes and home Insurance. This calculator computes principal and interest with the standard amortization formula and optionally spreads your annual tax and insurance bills across twelve monthly installments — the way most lenders collect them in escrow.
M = P × [ r(1+r)n ] / [ (1+r)n − 1 ]
where P is the loan amount (home price minus down payment), r the monthly interest rate (annual rate ÷ 12) and n the number of monthly payments (years × 12).
Worked Example
Say you buy a $350,000 home with $70,000 (20 %) down and finance $280,000 at 6.5 % for 30 years. The formula gives a principal & interest payment of about $1,770 per month. Over 360 payments you would pay roughly $357,000 in interest — more than the original loan. Add $4,200/year property tax and $1,500/year insurance and the full monthly bill lands near $2,245.
What Moves Your Payment the Most
- Interest rate: On a $280,000 30-year loan, each percentage point changes the payment by roughly $180/month — shop rates aggressively.
- Loan term: A 15-year term raises the monthly payment but typically cuts the rate and slashes total interest by more than half.
- Down payment: Putting at least 20 % down avoids private mortgage insurance (PMI) with most U.S. lenders.
What This Estimate Leaves Out
PMI, HOA dues, closing costs and rate changes on adjustable mortgages are not included. Treat the result as a planning number, not a loan offer — your lender's Loan Estimate is the binding document.