Mortgage Calculator

A mortgage is the largest financial commitment most Americans ever make. With the median US home price at $412,000 in 2024 and 30-year fixed rates hovering between 6.5%–7.5%, understanding every component of your monthly payment before you sign saves you thousands — or tens of thousands — over the life of the loan. This calculator shows your full monthly payment breakdown, total interest paid, and a year-by-year amortization schedule. **How Much House Can I Afford?** Before running the mortgage calculator, you need to know your purchase ceiling. Lenders use two debt-to-income (DTI) ratios: - Front-end DTI: Your housing payment (PITI) should not exceed 28% of gross monthly income - Back-end DTI: All debt payments (housing + auto + student loans + credit cards) should not exceed 43% of gross monthly income Affordability by income level (assuming 20% down, 7% rate, 30-year term, no PMI): Gross Annual Income | Max Home Price (28% front-end) | Monthly Payment (PITI est.) $60,000 ($5,000/mo) | ~$210,000 | ~$1,400 $80,000 ($6,667/mo) | ~$280,000 | ~$1,867 $100,000 ($8,333/mo) | ~$350,000 | ~$2,333 $120,000 ($10,000/mo) | ~$420,000 | ~$2,800 $150,000 ($12,500/mo) | ~$525,000 | ~$3,500 $200,000 ($16,667/mo) | ~$700,000 | ~$4,667 These are guidelines, not guarantees. Your actual approval depends on credit score, existing debts, assets, and the lender's specific underwriting criteria. **Enter Your Loan Details** Fill in four fields: home price, down payment (dollar amount or percentage), loan term (typically 15 or 30 years), and interest rate. The calculator instantly shows your principal and interest (P&I) payment, but your real monthly obligation is PITI. **PITI: Your Real Monthly Payment** Lenders qualify you on PITI — the four components every homeowner pays: - Principal: The portion of your payment that reduces your loan balance. In early years this is surprisingly small — on a $400K loan at 7%, only $400 of your first $2,661 P&I payment reduces principal. The rest is interest. - Interest: The lender's fee for lending money, calculated on the remaining balance. It front-loads aggressively — you pay mostly interest for the first decade. - Taxes: Property taxes, paid monthly into escrow and remitted annually by your lender. National average is 1.1% annually, but varies dramatically by state. - Insurance: Homeowner's insurance, typically $1,000–$2,500/year nationally ($83–$208/month). Example PITI breakdown on a $400,000 home, 20% down ($80K), $320,000 loan, 7% rate, 30 years: - P&I: $2,129/month - Property tax (1.1%): $367/month - Homeowner's insurance: $150/month - Total PITI: $2,646/month **Property Tax Rates by State** This is the most variable component of PITI and shocks many first-time buyers: State | Effective Tax Rate | Annual Tax on $400K Home New Jersey | 2.23% | $8,920 Illinois | 2.08% | $8,320 New Hampshire | 1.93% | $7,720 Texas | 1.60% | $6,400 Vermont | 1.59% | $6,360 Nebraska | 1.54% | $6,160 Wisconsin | 1.51% | $6,040 Ohio | 1.41% | $5,640 Pennsylvania | 1.36% | $5,440 Colorado | 0.55% | $2,200 Utah | 0.52% | $2,080 Arizona | 0.51% | $2,040 Nevada | 0.48% | $1,920 California | 0.74% | $2,960 Florida | 0.86% | $3,440 Hawaii | 0.27% | $1,080 **PMI: When You Owe It and When It Drops** Private Mortgage Insurance (PMI) is required on conventional loans when your down payment is less than 20% of the purchase price. PMI costs 0.5%–2.0% of the loan amount annually, depending on your credit score and loan-to-value ratio. PMI cost example: $400,000 home, 5% down ($20K), $380,000 loan, PMI at 1%: - Annual PMI: $3,800/year - Monthly PMI: $317/month — added on top of PITI PMI is not permanent. Under the Homeowners Protection Act: - You can request cancellation when your equity reaches 20% (LTV drops to 80%) based on original purchase price - PMI must be automatically terminated when your LTV drops to 78% based on the original amortization schedule - On a $400K home with 5% down, this automatic termination happens around year 9 of a 30-year loan at 7% To reach 20% equity faster: make extra principal payments. Every $1 in extra principal directly reduces your balance and accelerates PMI removal. **30-Year vs. 15-Year Mortgage: The Full Comparison** This is the most consequential choice in your mortgage structure. Here is the real math on a $320,000 loan: Metric | 30-Year at 7.0% | 15-Year at 6.5% Monthly P&I | $2,129 | $2,791 Monthly difference | — | +$662 Total interest paid | $446,440 | $142,380 Interest saved | — | $304,060 Equity after 5 years | $22,400 | $75,900 Equity after 10 years | $50,800 | $186,200 Loan paid off | Year 30 | Year 15 The 15-year saves $304,060 in interest — but requires $662 more per month. That $662 invested at 8% annual return in an index fund over 15 years grows to approximately $228,000. Neither answer is universally right — it depends on your tax rate, investment discipline, and risk tolerance. **Points Buydown: Is Paying Points Worth It?** Mortgage points (discount points) let you prepay interest to reduce your rate. One point = 1% of the loan amount, typically buys 0.25% rate reduction. Break-even analysis on a $400,000 loan, buying 1 point: - Cost: 1% × $400,000 = $4,000 paid at closing - Rate reduction: 7.0% → 6.75% - Monthly savings: $2,661 → $2,595 = $66/month saved - Break-even: $4,000 / $66 = 60.6 months (5.05 years) If you keep the loan longer than 5 years: buying points wins. If you refinance or sell before 5 years: don't buy points. The national average time homeowners keep a mortgage before refinancing or selling is about 7 years — so points often pay off for buyers who plan to stay. **ARM vs. Fixed-Rate: Understanding the Risk** Adjustable-Rate Mortgages (ARMs) offer a lower initial rate for a fixed period (3, 5, 7, or 10 years), then adjust annually based on a benchmark index (typically SOFR) plus a margin. A 5/1 ARM at 6.0% vs. 30-year fixed at 7.0% on a $320,000 loan: - Years 1–5: ARM saves $208/month vs. fixed ($1,919 vs. $2,127) - Total savings years 1–5: $12,480 - Year 6: ARM rate adjusts. If rates rose to 9%, payment jumps to $2,584 — $457 MORE than the fixed - Payment shock risk: realistic if rates rise 2+ percentage points during the adjustment period ARMs make sense if: you're certain you'll sell or refinance before the adjustment period ends, or if you expect rates to fall significantly. **How Amortization Actually Works** Amortization is the process of paying down a loan through scheduled payments where each payment allocates a different portion to principal vs. interest. On a $320,000 loan at 7% (30-year fixed), the amortization is front-heavy with interest: Payment # | Principal | Interest | Remaining Balance 1 | $256 | $1,867 | $319,744 12 | $271 | $1,852 | $316,545 60 (yr 5) | $310 | $1,813 | $309,537 120 (yr 10) | $403 | $1,720 | $295,041 180 (yr 15) | $524 | $1,599 | $274,830 240 (yr 20) | $683 | $1,440 | $247,063 300 (yr 25) | $889 | $1,234 | $209,199 360 (yr 30) | $1,159 | $965 | $0 Note how in month 1, only $256 of $2,123 reduces your balance — 88% goes to interest. By year 20, the split reverses somewhat. This is why early extra payments are so powerful. **Refinance Break-Even: When Does It Make Sense?** Formula: Break-even months = Closing costs / Monthly savings Example: Current loan $320,000 at 7.5%, refi to 6.75%, closing costs $6,000: - Current payment: $2,238 - New payment: $2,129 - Monthly savings: $109 - Break-even: $6,000 / $109 = 55 months (4.6 years) If you plan to stay longer than 4.6 years: refinance. If you might move sooner: the costs outweigh the savings. **Common Mortgage Mistakes and Their Dollar Cost** 1. Only shopping one lender: The CFPB found that borrowers who got just one rate quote left an average of $1,500 in savings on the table. Get 3–5 quotes. On a $400K loan, a 0.5% rate difference saves $105/month or $37,800 over 30 years. 2. Ignoring APR and focusing only on rate: APR includes lender fees. A 6.875% rate with $5,000 in fees vs. 7.0% with $500 in fees — the lower-rate option may actually cost more if you sell in 5 years. 3. Not locking your rate: Rates can move 0.25%–0.5% in a single week during volatile periods. A 0.5% rate increase on a $400K loan costs $133/month. 4. Draining all savings for a larger down payment: Leaving less than 2 months of PITI in savings post-close puts you in a financially dangerous position. Keep an emergency fund even if it means a slightly smaller down payment. 5. Making major purchases between pre-approval and closing: Financing a $30,000 car can add $600/month to your DTI and disqualify you from the mortgage, even after pre-approval.