Mortgage Calculator
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By James MitchellReviewed by Michael Torres, CFP (Certified Financial Planner)Published: Updated:
References
- [1]Consumer Financial Protection Bureau, Consumer Financial Protection Bureau - Mortgage Disclosure Resources. https://www.consumerfinance.gov/owning-a-home/loan-estimate/
- [2]Freddie Mac, Freddie Mac Primary Mortgage Market Survey. https://www.freddiemac.com/pmms
- [3]Fannie Mae, Fannie Mae - Selling Guide: Mortgages Overview. https://selling-guide.fanniemae.com
- [4]U.S. Department of Housing and Urban Development, Federal Housing Administration - Mortgage Insurance. https://www.hud.gov/program_offices/housing/sfh/ins/203h-insurance
How to Use?
- 1
Enter the home price and your down payment
Type the total purchase price of the home and the cash amount you plan to pay upfront. A down payment of 20% or more eliminates the need for private mortgage insurance (PMI).
- 2
Enter the interest rate and loan term
Input the annual interest rate from your lender or pre-approval offer. Choose the loan term in years or months. Common terms are 15, 20, and 30 years. The default is 30 years.
- 3
Add extra principal payments (optional)
Enter any additional amount you plan to pay toward principal each month. Even small extra payments save thousands in interest and shorten your loan term significantly.
- 4
Enable Advanced Mode for a realistic estimate (optional)
Toggle Advanced Mode to include annual property taxes, homeowners insurance, PMI rate, and monthly HOA fees. This shows your true monthly housing cost including all expenses.
- 5
Review the results and amortisation schedule
The calculator shows your monthly payment, total interest, and loan payoff period. The full amortisation schedule breaks down every payment into interest and principal portions.
- 6
Compare different scenarios
Change the down payment, term, or rate to see how each affects your monthly payment and total interest. Use the extra payment field to find the optimal amount that fits your budget while maximising long-term savings.
Worked Examples
1Standard 30-Year Mortgage
Given Values
Home Price:300000
Down Payment:60000
Annual Interest Rate:6.5
Loan Term:360
Extra Principal Payment (optional):0
Results
Loan Amount:240000
Monthly Payment:1517
totalPaid:546120
Total Interest:306120
215-Year vs 30-Year Comparison
Given Values
Home Price:350000
Down Payment:70000
Annual Interest Rate:5.5
Loan Term:180
Extra Principal Payment (optional):0
Results
Loan Amount:280000
Monthly Payment:2286
totalPaid:411480
Total Interest:131480
3With Extra Payments
Given Values
Home Price:300000
Down Payment:60000
Annual Interest Rate:6.5
Loan Term:360
Extra Principal Payment (optional):200
Results
Loan Amount:240000
Monthly Payment:1517
totalPaid:546120
Total Interest:306120
4Low Down Payment With PMI (Advanced Mode)
Given Values
Home Price:250000
Down Payment:12500
Annual Interest Rate:7
Loan Term:360
Extra Principal Payment (optional):0
Results
Loan Amount:237500
Monthly Payment:1580
totalPaid:568800
Total Interest:331300
5Refinance Scenario
Given Values
Home Price:200000
Down Payment:0
Annual Interest Rate:5.5
Loan Term:360
Extra Principal Payment (optional):0
Results
Loan Amount:200000
Monthly Payment:1136
totalPaid:408960
Total Interest:208960
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Frequently Asked Questions
The monthly payment is calculated using the standard amortisation formula: M = P [r(1+r)^n] / [(1+r)^n - 1], where M is the monthly payment, P is the loan amount (home price minus down payment), r is the monthly interest rate (annual percentage rate divided by 12), and n is the total number of monthly payments. The formula ensures each payment is the same amount over the full term, with the interest portion decreasing and the principal portion increasing over time as the loan balance declines. This calculator uses the same formula that all lenders use for fixed-rate mortgages.
Four primary factors determine your mortgage payment: the home price, down payment amount, interest rate, and loan term. A higher home price and lower down payment increase the loan amount, which raises the monthly payment. Higher interest rates increase the cost of borrowing, raising both the monthly payment and total interest. Shorter loan terms have higher monthly payments but significantly lower total interest. Additional factors that affect your true monthly payment include property taxes, homeowners insurance, private mortgage insurance (PMI) if your down payment is under 20%, and homeowners association (HOA) fees. The Advanced Mode in this calculator includes all these costs.
Yes, you can reduce total interest in several ways. Making a larger down payment reduces the loan amount and therefore the total interest charged. Choosing a shorter loan term, such as 15 years instead of 30 years, dramatically reduces interest even if the rate is slightly lower. Securing a lower interest rate through better credit, rate shopping, or buying discount points also reduces total interest. Making extra principal payments each month is one of the most powerful strategies because every extra dollar reduces the principal balance, which eliminates future interest on that dollar for the remaining loan term. Even $100 per month extra on a $240,000 loan at 6.5% saves over $61,000 in interest.
A fixed-rate mortgage (FRM) locks your interest rate for the entire loan term, giving you predictable monthly payments for 15, 20, or 30 years. An adjustable-rate mortgage (ARM) has a rate that is fixed for an initial period (typically 3, 5, 7, or 10 years) and then adjusts annually based on a market index plus a margin. ARMs usually start with a lower rate than FRMs, but the rate can rise over time. A 5/1 ARM fixed at 5.5% for five years might adjust to 6.5% in year six and could reach 8% or higher over time. ARMs make sense if you plan to sell or refinance before the adjustable period begins. FRMs are better for long-term stability and predictability.
PMI is required when your down payment is less than 20% of the home price. It protects the lender, not you, in case of default. PMI typically costs 0.3% to 1.5% of the original loan amount per year, depending on your credit score and loan-to-value ratio. On a $300,000 loan with 5% down, PMI at 0.8% adds $200 per month to your payment. PMI can be removed once you reach 20% equity in your home. Under the Homeowners Protection Act, your lender must automatically terminate PMI when your loan balance reaches 78% of the original value, and you can request early cancellation at 80%. Making extra payments accelerates equity building and PMI removal.
Pre-qualification is an informal estimate of how much you can borrow based on self-reported income, assets, and debt. It is not a firm commitment and does not require a credit check or documentation. Pre-approval is a formal process where the lender verifies your income, assets, and credit score and issues a pre-approval letter with a specific loan amount. Pre-approval requires a hard credit pull and documentation such as pay stubs, bank statements, and tax returns. Sellers and real estate agents take pre-approved buyers more seriously because the financing risk is lower. Most listing agents require a pre-approval letter before accepting an offer in competitive markets.
The minimum down payment depends on the loan type. Conventional loans require as little as 3% down for first-time buyers, but PMI is required until you reach 20% equity. FHA loans require 3.5% down with an FHA mortgage insurance premium for the life of the loan. VA loans for eligible veterans and active-duty military require zero down payment. USDA loans for rural properties also offer zero down payment options. A 20% down payment is the gold standard because it eliminates PMI, lowers your monthly payment, and often qualifies you for a lower interest rate. However, putting less than 20% down can be a smart financial decision if home prices in your area are rising faster than you can save or if renting costs more than owning.
Closing costs are fees paid at the closing table to finalise your mortgage. They typically include the loan origination fee (0.5% to 1% of the loan amount), appraisal fee ($400 to $700), title insurance ($500 to $1,500), credit report fee ($30 to $50), recording fees ($100 to $300), and prepaid items such as property taxes and homeowners insurance escrow. Total closing costs typically range from 2% to 5% of the loan amount. On a $300,000 loan, expect to pay $6,000 to $15,000 at closing. You can ask the seller to pay some or all of the closing costs as part of your offer, or you can accept a higher interest rate in exchange for a lender credit that covers closing costs.
A 15-year mortgage has a higher monthly payment but saves tens of thousands in interest. On a $300,000 loan, a 15-year term at 5.5% costs $2,451 per month with $141,240 total interest. A 30-year term at 6.5% costs $1,896 per month with $382,560 total interest. The 15-year borrower pays $555 more per month but saves $241,320 in interest. Choose the 15-year term if you can comfortably afford the higher payment and want to build equity quickly and minimise interest. Choose the 30-year term if you need the lower monthly payment to fit your budget or if you plan to invest the payment difference for higher long-term returns.
Your credit score is the primary factor lenders use to set your interest rate. Borrowers with exceptional credit (780+) typically qualify for the lowest advertised rates, while borrowers with fair credit (620 to 679) pay 1% to 2% more. On a $300,000 loan, a 1% rate difference costs roughly $190 per month and $68,400 over 30 years. Improving your credit score by 40 to 50 points before applying can move you to a lower rate tier and save thousands. Check your credit report for errors, pay down credit card balances, and avoid new credit applications in the months before you apply for a mortgage.
Amortisation is the process of paying off a loan through scheduled, equal monthly payments over a fixed term. Each payment consists of an interest portion and a principal portion. Early in the loan, most of the payment goes toward interest because the outstanding balance is largest. As the balance declines over time, the interest portion decreases and the principal portion increases. On a $280,000 loan at 6.5% for 30 years, the first payment includes $1,517 in interest and $253 in principal. By year 15, the split is roughly equal. By year 25, over $1,000 goes to principal. The amortisation schedule in this calculator shows the exact breakdown for every month of your loan.
Extra principal payments directly reduce your loan balance, which shortens the repayment period and saves interest. A $300,000 loan at 6.5% for 30 years costs $382,560 in interest over the full term. Adding $100 per month saves $61,080 in interest and pays off the loan 38 months early. Adding $200 per month saves $105,180 and pays off the loan 71 months early. Adding $500 per month saves $187,890 and pays off the loan 142 months early. Even occasional extra payments, such as applying a tax refund or bonus to the principal, make a meaningful difference. The extra payment field in this calculator shows you the exact savings for any additional amount.
The debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward debt payments, including your mortgage, car loans, credit cards, student loans, and other obligations. Lenders use DTI to determine how much you can borrow. For conventional loans, the front-end DTI (housing payment only) should be below 28%, and the back-end DTI (all debt payments) should be below 36% to 43%. A borrower earning $8,000 per month with a $2,000 mortgage and $500 in other debt payments has a back-end DTI of 31%, which is within conventional guidelines. Exceeding the DTI limits may require compensating factors such as a larger down payment or higher credit score. Use the Debt-to-Income Ratio Calculator to evaluate your DTI with your specific numbers.
Discount points, also called mortgage points, are upfront fees paid to the lender at closing in exchange for a lower interest rate. One point costs 1% of the loan amount and typically reduces the rate by 0.25%. On a $300,000 loan, one point costs $3,000 and might lower the rate from 6.5% to 6.25%, reducing the monthly payment by $50. The break-even period is roughly 60 months ($3,000 / $50). Points make sense if you plan to stay in the home long enough to recover the upfront cost. If you plan to sell or refinance within a few years, paying points is usually not worthwhile. The IRS treats mortgage points as prepaid interest, which may be tax-deductible in the year you pay them.
Property taxes are assessed by local governments based on your home’s assessed value. They are typically collected through an escrow account, where your lender adds one-twelfth of the annual tax bill to each monthly payment and pays the tax bill on your behalf when due. The average effective property tax rate in the U.S. is about 0.99%, but rates vary widely by location. On a $350,000 home, annual property taxes could range from $1,085 in a low-tax area to $7,805 in a high-tax area. The Advanced Mode in this calculator lets you enter your estimated annual property tax to see its impact on your true monthly payment. Always research property tax rates for your target area before making an offer, as they vary significantly even within the same county.
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