Mortgage Calculator
The Mortgage Calculator helps estimate your monthly mortgage payment along with other financial costs associated with homeownership. Enter your loan details to calculate the monthly payment and see how factors like interest rate and loan term affect the total cost of your mortgage.
Use this calculator to help with budgeting for a new home purchase or to explore refinancing options for an existing mortgage.
Learn More About Mortgages
A mortgage is a loan secured by property, usually real estate. When you take out a mortgage, the lender helps you pay for the property, and you agree to repay the borrowed money over a specific period, typically 15 or 30 years in the United States.
Each mortgage payment consists of several components:
- Principal: The original amount borrowed
- Interest: The cost paid to the lender for borrowing the money
- Property taxes: Often collected monthly in an escrow account
- Homeowners insurance: Typically required by lenders and also collected in escrow
In the U.S., the most common mortgage is the conventional 30-year fixed-interest loan, representing 70% to 90% of all mortgages.
Understanding the key components of a mortgage helps you make informed decisions:
Loan Amount
The amount borrowed from a lender, typically the purchase price minus your down payment. The maximum loan amount you can borrow usually correlates with your income and other financial factors.
Down Payment
The upfront portion of the purchase price that you pay. Lenders typically prefer a down payment of 20% or more. With less than 20% down, you'll usually need private mortgage insurance (PMI).
Loan Term
The period over which you'll repay the loan, commonly 15, 20, or 30 years. Shorter terms typically have lower interest rates but higher monthly payments.
Interest Rate
The percentage charged by the lender for borrowing the money. Mortgages can have fixed rates (unchanging for the entire term) or adjustable rates (which change periodically based on market conditions).
Monthly mortgage payments are calculated using an amortization formula that ensures the loan is paid off completely by the end of the term. Here's the formula used:
Where:
- M = Monthly payment
- P = Principal (loan amount)
- r = Monthly interest rate (annual rate divided by 12 and expressed as a decimal)
- n = Total number of payments (loan term in years × 12)
In the early years of your mortgage, a larger portion of each payment goes toward interest rather than principal. As you progress through the loan term, more of each payment goes toward reducing the principal.
- Make extra payments when possible. Even small additional amounts applied to the principal can significantly reduce your total interest paid and shorten your loan term.
- Consider bi-weekly payments. Making half your mortgage payment every two weeks results in 26 half-payments per year (equivalent to 13 monthly payments instead of 12), which can save you thousands in interest.
- Refinance when it makes sense. If interest rates drop significantly or your credit improves, refinancing could lower your monthly payment or reduce your total interest costs.
- Understand the impact of points and fees. Sometimes paying points upfront to lower your interest rate makes financial sense, especially if you plan to stay in the home for many years.
- Avoid private mortgage insurance if possible. Saving for a 20% down payment or using certain loan programs can help you avoid this additional cost.
Fixed-Rate Mortgages
The interest rate remains constant for the entire loan term. This provides payment stability but typically starts with a higher rate than adjustable options.
Adjustable-Rate Mortgages (ARMs)
The interest rate is fixed for an initial period (commonly 3, 5, 7, or 10 years), then adjusts periodically based on market indexes. ARMs usually start with lower rates but involve more risk as payments can increase over time.
FHA Loans
Insured by the Federal Housing Administration, these loans have more flexible qualification requirements and lower down payment options (as low as 3.5%), making them popular with first-time buyers.
VA Loans
Guaranteed by the Department of Veterans Affairs, these loans are available to service members, veterans, and eligible surviving spouses. They often require no down payment or mortgage insurance.
USDA Loans
Backed by the U.S. Department of Agriculture, these loans are designed for rural property buyers with moderate to low incomes and may require no down payment.
Jumbo Loans
These exceed the conforming loan limits set by Fannie Mae and Freddie Mac and are designed for higher-priced properties. They typically require larger down payments and excellent credit.