Mortgage Calculator

A mortgage calculator is a valuable tool that helps you estimate your monthly mortgage payment based on factors like home price, down payment, and interest rate. Understanding these estimates can help you set a realistic home-buying budget and determine whether you need to save more before purchasing.

Mortgage Calculator Results Explained

A mortgage calculator shows your estimated monthly mortgage payment based on inputs like home price, down payment, and loan term. You can optionally enter property taxes, homeowners insurance, and an interest rate for a more accurate mortgage estimate. 

Your estimated mortgage payment typically includes these components: 

• Principal and interest: The principal is the loan amount, while the interest is the cost of borrowing.
• Property taxes: Local governments charge annual property taxes.
• Homeowners insurance: Homeowners insurance protects against damage or loss to the property.
• Private mortgage insurance (PMI): PMI is required if your down payment is less than 20% of the home’s price.

The calculator will also show the total mortgage cost, which includes the original mortgage loan amount and total interest paid over the life of the loan. The total mortgage amount assumes a fixed interest rate.

You can click to view the amortization schedule, which breaks down how much of each payment goes toward principal and interest over time. For each month, you can view the total cumulative interest paid toward the mortgage loan and the total remaining balance.

Costs Often Included in a Monthly Mortgage Payment

A monthly mortgage payment typically includes principal, interest, property taxes, and insurance, also known as PITI.

• Principal: The portion of your payment that goes toward repaying the loan balance
• Interest: The cost of borrowing a mortgage loan, calculated as a percentage of the remaining loan balance
• Property taxes: Assessed by your local government based on the value of your property. Property taxes are usually charged on an annual basis and divided into monthly amounts and included in your mortgage payment.
• Homeowners insurance: Protection for losses and damages to your property. Lenders require homeowners insurance to protect the property.
• Private mortgage insurance: If your down payment is less than 20% of the home purchase price, conventional lenders require PMI to protect themselves in case of default.

How to Calculate Monthly Mortgage Payments

While using a mortgage calculator is the easiest way to calculate your monthly mortgage payments, you can also calculate mortgage payments using this formula.

$begin{aligned}&M = frac{ P left [ i (1 + i) ^ n right ] }{ left [ (1 + i) ^ n – 1 right ] } \&textbf{where:} \&P = text{Principal loan amount (the amount you borrow)} \&i = text{Monthly interest rate} \&n = text{Number of months required to repay the loan} \end{aligned}$​M=[(1+i)n−1]P[i(1+i)n]​where:P=Principal loan amount (the amount you borrow)i=Monthly interest raten=Number of months required to repay the loan​

How to Calculate My Monthly Interest Cost

You can calculate your mortgage interest with this formula:

$begin{aligned} &text{Monthly Interest} = frac{ text{Loan Balance} times text{Interest Rate} }{ 12 } \ end{aligned}$​Monthly Interest=12Loan Balance×Interest Rate​​

Interest changes each month as your balance changes.

For example, your monthly interest payment on a $200,000 loan balance with 6% interest rate would be: $200,000 x 0.06 / 12 = $1,000.

If your balance drops to $199,200 next month, your new interest payment would be: $199,200 x 0.06 / 12 = $996.

How Can a Mortgage Payment Calculator Help Me?

A mortgage calculator is valuable if you’re planning a home purchase. A mortgage calculator can help you in several ways:

• Estimate monthly payments: Provide the loan amount, interest rate, loan term, and down payment to estimate your potential loan payment quickly.
• Compare loan scenarios: You can see how different factors affect your monthly payment. For instance, you can see the difference between a 15-year and 30-year mortgage or how your monthly payment might change based on your down payment or interest rate.
• Plan for other costs: You can get a more accurate monthly estimate by factoring in other monthly housing costs, like homeowners insurance, property taxes, and private mortgage insurance.
• Track home equity growth: View an amortization schedule to see how much of your payment is paid toward interest vs. principal and how your equity builds over time.
• Set a home buying budget: Use the calculator to gauge what you can afford and set a comfortable price range for your home search.

How Much House Can I Afford? 

The amount of house you can afford depends on your income, debt, and savings. Lenders commonly use the 28/36 rule to determine home affordability.

• 28%: Your housing expenses shouldn’t exceed 28% of your gross income.
• 36%: Your total debt payments shouldn’t exceed 36% of your gross income.

Lenders will also look at your debt-to-income (DTI) ratio (or “back-end ratio”) to gauge your borrowing risk. If you’re spending too much on debt each month, you may not have enough income left for home expenses. While a DTI under 36% is ideal, some lenders accept ratios up to 50%, depending on the mortgage.

Your down payment will affect home affordability. A larger down payment increases your purchasing power and can eliminate PMI if you pay 20% of the home’s price. Of course, you should reserve some cash for closing costs, moving expenses, and an emergency fund.

Consider purchasing less than the maximum loan amount you’re approved for. Opting for a smaller loan keeps you flexible and makes managing your monthly housing expenses easier. Having a lower mortgage payment also frees up income for savings, retirement, or other goals.

The Bottom Line

A mortgage calculator is a great starting place for estimating your mortgage payment. You can use mortgage payment information to understand how much house you can afford and how different loan terms impact your mortgage payment. Having an idea of your potential monthly payment allows you to set a budget and focus on your home shopping.