Free Mortgage Calculator

How to Use This Mortgage Calculator

Our free mortgage calculator helps you estimate your monthly mortgage payment and understand the total cost of your home loan. Simply enter your home price, down payment, interest rate, and loan term to see instant results.

For the most accurate estimate, include additional costs like property taxes, homeowners insurance, PMI (if your down payment is less than 20%), and HOA fees. These are often bundled into your monthly payment and can significantly impact your total housing cost.

The calculator shows you a detailed breakdown of principal vs. interest payments over time, helping you understand how much of your payment goes toward building equity versus paying interest to the lender.

Understanding Your Mortgage Payment (PITI)

Your total monthly mortgage payment typically consists of four main components, known as PITI:

Principal

The principal is the amount you borrow from the lender. Each month, part of your payment goes toward reducing this balance. In the early years of your mortgage, only a small portion pays down principal, but this increases over time.

Interest

Interest is what the lender charges you for borrowing money. It's calculated as a percentage of your remaining loan balance. In a 30-year mortgage, you'll pay more in interest than the original loan amount if you keep it for the full term.

Property Taxes

Most homeowners pay property taxes through their mortgage payment into an escrow account. Property tax rates vary by location, typically ranging from 0.5% to 2.5% of your home's assessed value annually.

Insurance

Homeowners insurance protects your property and is usually required by lenders. The cost varies based on location, home value, coverage amount, and risk factors. Average annual premiums range from $1,000 to $3,000.

Additional Costs:

• PMI (Private Mortgage Insurance): Required if your down payment is less than 20%. Typically costs 0.5% to 1% of the loan amount annually.
• HOA Fees: If your property is in a homeowners association, monthly or annual fees may apply, ranging from $100 to $700+ per month.

What Affects Your Mortgage Payment?

Interest Rate

Your interest rate has the biggest impact on your monthly payment. Even a 0.5% difference can mean tens of thousands of dollars over the life of the loan. Rates are influenced by your credit score, down payment, loan term, and overall market conditions.

Example: On a $300,000 loan, a 6.5% rate costs $1,896/month while 7.0% costs $1,996/month—that's $36,000 more over 30 years!

Down Payment

A larger down payment reduces your loan amount and monthly payment. It also helps you avoid PMI if you put down 20% or more. Even an extra $10,000 down can save you over $40 per month.

Loan Term

Shorter loan terms (15 or 20 years) have higher monthly payments but significantly lower total interest. Longer terms (30 years) offer lower monthly payments but cost more overall.

Credit Score

Your credit score directly affects your interest rate. Excellent credit (740+) qualifies for the best rates, while lower scores result in higher rates. A 100-point difference can mean a 0.5-1% higher rate.

Mortgage Calculator FAQ

How do I calculate my monthly mortgage payment?

To calculate your monthly mortgage payment, use the formula: M = P[r(1+r)^n]/[(1+r)^n-1], where M is monthly payment, P is principal loan amount, r is monthly interest rate (annual rate divided by 12), and n is number of payments (loan term in years multiplied by 12). Our calculator does this automatically for you.

What is included in my total monthly mortgage payment?

Your total monthly payment includes Principal and Interest (P&I), Property Taxes, Homeowners Insurance, Private Mortgage Insurance (PMI) if applicable, and HOA fees if applicable. This is commonly referred to as PITI (Principal, Interest, Taxes, Insurance).

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage has higher monthly payments but you pay significantly less interest overall and build equity faster. A 30-year mortgage has lower monthly payments, providing more flexibility, but costs more in total interest. Choose based on your budget, financial goals, and how long you plan to stay in the home.

How much house can I afford?

A general rule is that your monthly housing payment should not exceed 28% of your gross monthly income. Lenders typically use the 28/36 rule: housing costs shouldn't exceed 28% of income, and total debt payments shouldn't exceed 36%. Use our calculator to see what payment fits your budget.

What is PMI and when do I need it?

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. It protects the lender if you default on the loan. PMI typically costs 0.5% to 1% of the loan amount annually. Once you reach 20% equity, you can request to have PMI removed.

Should I pay extra toward my mortgage principal?

Paying extra toward principal reduces your loan balance faster and can save thousands in interest. Even $100 extra per month on a $300,000 loan at 6.5% saves about $35,000 in interest and pays off the loan 4 years early. However, consider if investing that money might yield better returns.

What credit score do I need to buy a house?

The minimum credit score varies by loan type: Conventional loans typically require 620+, FHA loans accept 580+ (500+ with 10% down), and VA loans have no minimum but lenders usually want 620+. Higher scores (740+) qualify for better interest rates.

How do I get the best mortgage rate?

To get the best rate: improve your credit score to 740+, save for a 20%+ down payment, compare offers from multiple lenders, consider shorter loan terms (15 or 20 years), buy mortgage points if staying long-term, and time your application when rates are favorable.

Can I pay off my mortgage early?

Most modern mortgages have no prepayment penalty, allowing you to pay extra toward principal or pay off the loan early without fees. Check your loan documents to confirm. Paying off your mortgage early can save significant interest but consider opportunity cost of investing those funds elsewhere.

What's the difference between pre-qualification and pre-approval?

Pre-qualification is an estimate of how much you can borrow based on self-reported financial information. Pre-approval is more rigorous—the lender verifies your finances and runs a credit check, giving you a conditional commitment for a specific loan amount. Pre-approval strengthens your offer when buying.

How Mortgages Work: Complete Guide

What is a Mortgage?

A mortgage is a loan specifically used to purchase real estate. The property itself serves as collateral for the loan—if you don't make your payments, the lender can foreclose and take ownership. Mortgages typically have terms of 15, 20, or 30 years and fixed or adjustable interest rates.

Types of Mortgages

Conventional Loans

Conventional mortgages are not backed by the government. They typically require higher credit scores (620+) and larger down payments (5-20%). If you put down less than 20%, you'll pay PMI. These loans come in fixed-rate and adjustable-rate varieties.

FHA Loans

Federal Housing Administration (FHA) loans are government-backed and designed for first-time buyers and those with lower credit scores. They allow down payments as low as 3.5% (with 580+ credit score) but require mortgage insurance premiums (MIP) for the life of the loan if you put down less than 10%.

VA Loans

Veterans Affairs (VA) loans are available to military service members, veterans, and eligible spouses. They offer 0% down payment options, no PMI requirement, competitive interest rates, and more lenient credit requirements. This is often the best option for those who qualify.

USDA Loans

USDA loans are designed for rural and suburban homebuyers who meet income limits. They offer 0% down payment, competitive rates, and lower mortgage insurance than FHA loans. Properties must be in USDA-eligible areas.

Fixed-Rate vs Adjustable-Rate Mortgages

Fixed-Rate Mortgage (FRM)

With a fixed-rate mortgage, your interest rate and monthly payment remain constant for the entire loan term. This provides predictability and protection against rising interest rates. Most borrowers choose 30-year fixed mortgages for stability.

Adjustable-Rate Mortgage (ARM)

ARMs have interest rates that adjust periodically based on market conditions. They typically start with a lower rate than fixed mortgages (the "teaser rate") but can increase significantly. Common ARMs are 5/1, 7/1, or 10/1, where the first number is years at the fixed rate, and the second is how often it adjusts.

The Mortgage Application Process

1. Check Your Credit: Review your credit report and score. Dispute any errors and work to improve your score if needed.
2. Get Pre-Approved: Submit financial documents to a lender for pre-approval. This shows sellers you're a serious buyer.
3. Shop for Homes: Work with a real estate agent to find properties within your budget.
4. Make an Offer: When you find a home, submit an offer with your pre-approval letter.
5. Home Inspection & Appraisal: The lender orders an appraisal to confirm the home's value. You should get an inspection to identify issues.
6. Underwriting: The lender verifies all your information and makes a final decision on your loan.
7. Closing: Sign final paperwork, pay closing costs, and receive the keys to your home!

Closing Costs

Closing costs typically range from 2% to 5% of the home's purchase price. These include:

• Loan origination fees
• Appraisal fees ($400-$600)
• Title insurance and search
• Attorney fees
• Recording fees
• Prepaid property taxes and insurance
• Escrow deposits

Building Home Equity

Home equity is the portion of your home that you truly own—the difference between your home's market value and what you owe on your mortgage. You build equity through:

• Mortgage payments: Each payment reduces your loan balance
• Home appreciation: Your home's value increases over time
• Home improvements: Renovations can increase your home's value
• Extra payments: Additional principal payments build equity faster

Refinancing Your Mortgage

Refinancing means replacing your current mortgage with a new loan, typically to:

• Lower your interest rate and monthly payment
• Change from an ARM to a fixed-rate mortgage
• Shorten your loan term (e.g., 30 to 15 years)
• Convert home equity to cash (cash-out refinance)
• Remove PMI after reaching 20% equity

A good rule of thumb: refinancing makes sense if you can lower your rate by at least 0.5-0.75% and plan to stay in the home long enough to recoup closing costs (typically 2-4 years).