How to Use This Calculator
How to Use the Mortgage Calculator
1. Enter the home purchase price
2. Input your down payment amount
3. Enter the interest rate offered by your lender
4. Select your loan term (15, 20, or 30 years)
5. Optionally add property tax, insurance, and PMI
6. Click Calculate to see your monthly payment breakdown
Formula
Mortgage Payment Formula
The monthly mortgage payment is calculated using the formula:
M = P × [r(1+r)^n] / [(1+r)^n - 1]
Where:
- M = Monthly payment
- P = Principal loan amount
- r = Monthly interest rate (annual rate / 12)
- n = Total number of payments (years × 12)
Examples
Example Calculations
Example 1: $300,000 Home
- Home Price: $300,000
- Down Payment: $60,000 (20%)
- Interest Rate: 6.5%
- Loan Term: 30 years
- Monthly Payment: $1,517
Example 2: $500,000 Home
- Home Price: $500,000
- Down Payment: $100,000 (20%)
- Interest Rate: 7.0%
- Loan Term: 30 years
- Monthly Payment: $2,661
Frequently Asked Questions
What is included in my monthly mortgage payment?
Your monthly payment typically includes four components (PITI): Principal (loan repayment), Interest (cost of borrowing), Property Taxes, and Insurance (homeowners insurance and possibly PMI).
How much should I put down on a house?
While 20% is traditional and avoids PMI, many loans allow 3-5% down. FHA loans require as little as 3.5%. However, larger down payments result in lower monthly payments and less interest paid over time.
What is PMI and when do I need it?
PMI (Private Mortgage Insurance) is required when your down payment is less than 20%. It protects the lender if you default. PMI typically costs 0.5-1% of the loan amount annually and can be removed once you reach 20% equity.
Should I choose a 15-year or 30-year mortgage?
15-year mortgages have higher monthly payments but lower interest rates and much less interest overall. 30-year mortgages have lower monthly payments, giving you more flexibility, but you pay significantly more in interest over the life of the loan.
How does interest rate affect my payment?
Even small changes in interest rates significantly impact your monthly payment. For a $300,000 loan, the difference between 6% and 7% is about $179/month, or $64,440 over 30 years.