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About This Calculator
Estimate your monthly mortgage payment based on home price, down payment, loan term, and interest rate. This calculator breaks down principal and interest portions so you can see exactly how your payment is allocated over time. Understanding these numbers helps you set a realistic housing budget before you start shopping for a home.
Quick Tips
- 1 Compare rates from at least 3 lenders to save thousands over the life of your loan.
- 2 A 15-year mortgage costs more monthly but saves massive interest compared to 30 years.
- 3 Put down 20% to avoid paying private mortgage insurance (PMI).
Example Calculation
A couple buys a $350,000 home with 20% down at 6.75% for 30 years.
Monthly payment: $1,816 | Total interest: $373,857 | Total cost: $653,857
How to Calculate Your Mortgage Payment
Your monthly mortgage payment is determined by three key factors: the loan amount (principal), the interest rate, and the loan term. The standard amortization formula M = P[r(1+r)^n] / [(1+r)^n - 1] divides your total obligation into equal monthly payments that cover both principal and interest. On a typical $280,000 loan at 6.75% over 30 years, this formula produces a monthly payment of approximately $1,816.
Understanding Mortgage Amortization
Amortization is the process of spreading your loan into a series of fixed payments over time. In the early years of a 30-year mortgage, roughly 70-80% of each payment goes toward interest rather than principal. As the loan matures, this ratio gradually reverses, and more of each payment reduces your outstanding balance. Reviewing an amortization schedule helps you understand exactly how much equity you build with every payment.
Fixed-Rate vs Adjustable-Rate Mortgages
A fixed-rate mortgage locks in your interest rate for the entire loan term, providing predictable monthly payments. An adjustable-rate mortgage (ARM) typically offers a lower initial rate for 5, 7, or 10 years before adjusting annually based on market indexes. ARMs can save money if you plan to sell or refinance before the adjustment period, but they carry the risk of significantly higher payments if rates rise.
How Down Payment Affects Your Monthly Cost
A larger down payment directly reduces your loan amount, lowering both your monthly payment and total interest paid over the life of the loan. Putting down at least 20% also eliminates the need for Private Mortgage Insurance (PMI), which typically costs 0.5% to 1.5% of the loan amount annually. For example, increasing your down payment from 10% to 20% on a $350,000 home saves roughly $175 per month in PMI alone.
Frequently Asked Questions
Your monthly payment is calculated using the loan amount, interest rate, and term with the standard amortization formula: M = P[r(1+r)^n] / [(1+r)^n - 1], where P is the principal, r is the monthly rate, and n is the number of payments.
A 15-year mortgage has higher monthly payments but significantly less total interest. A 30-year mortgage offers lower payments and more flexibility. Choose based on your monthly budget and long-term financial goals.
Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. PMI typically costs 0.5%–1.5% of the loan amount annually and can be removed once you reach 20% equity.
This calculator focuses on principal and interest. Property taxes, homeowners insurance, and PMI are additional costs that vary by location. Use the total as a baseline and add those expenses for a complete picture.
Even a small rate difference has a large impact. On a $300,000 loan over 30 years, a 0.5% rate increase adds roughly $30,000 in total interest. Shopping for the best rate is one of the most valuable things you can do.