How the Mortgage Calculator Works
A real mortgage payment is more than just principal and interest. This calculator adds property tax, homeowners insurance, and PMI (when applicable) to give you a realistic number to plan against.
What goes into the monthly payment
Principal & interest are calculated using the standard amortization formula on the loan amount (price minus down payment) at your rate over the term. Property tax is divided into monthly installments held in escrow. Insurance works the same way. PMI applies when your down payment is below 20% and is estimated at roughly 0.5% of the loan annually.
Why down payment matters more than you think
A 20% down payment removes PMI, gets you a better rate, reduces your loan balance, and lowers your monthly payment. On a $400,000 home, going from 5% to 20% down can save more than $300 a month and over $100,000 across the life of the loan.
How to use the result
A common rule of thumb is to keep your total housing cost (PITI) at or under 28% of your gross monthly income. That leaves room for utilities, maintenance, and the inevitable unexpected expenses that come with owning a home.
The 15 vs 30 year tradeoff
Use the term selector to see the difference. A 15-year mortgage typically carries a 0.5-0.75% lower interest rate and finishes in half the time, saving enormous total interest. The tradeoff is a much higher monthly payment that ties up cash you could use for other goals.