Mortgage Calculator
Free Online Mortgage Calculator with Taxes and Insurance for 2025
Loan Information
Loan Results
Loan Details
Frequently Asked Questions
How is my monthly mortgage payment calculated?
Your monthly mortgage payment is calculated based on four main components: principal, interest, taxes, and insurance (often referred to as PITI). The principal and interest are determined by your loan amount, interest rate, and loan term. Property taxes and homeowners insurance are estimated based on your location and home value.
What is PMI and when do I need to pay it?
PMI (Private Mortgage Insurance) is typically required when your down payment is less than 20% of the home's value. It protects the lender in case you default on your loan. The cost of PMI varies but is usually between 0.5% to 1% of the loan amount annually.
How does my down payment affect my mortgage?
A larger down payment reduces your loan amount, which can lower your monthly payments and the total interest you'll pay over the life of the loan. It may also help you avoid PMI if your down payment is 20% or more of the home's value.
Should I choose a 15-year or 30-year mortgage?
A 15-year mortgage typically has a lower interest rate but higher monthly payments. You'll pay less interest over the life of the loan and build equity faster. A 30-year mortgage has lower monthly payments but a higher interest rate and more total interest paid over time. The right choice depends on your financial situation and goals.
Understanding Mortgages: A Comprehensive Guide for Homebuyers
What is a Mortgage?
A mortgage is a loan specifically used to purchase real estate, where the property itself serves as collateral for the loan. When you take out a mortgage, you agree to pay back the borrowed amount plus interest over a set period of time. If you fail to make payments, the lender can foreclose on the property.
Mortgages typically have terms of 15 or 30 years, though other terms are available. The interest rate can be fixed (staying the same for the entire loan term) or adjustable (changing periodically based on market conditions).
How Mortgage Calculations Work
Understanding how your mortgage payment is calculated can help you make informed decisions about your home purchase. The monthly payment primarily consists of four components:
- Principal: The amount borrowed to buy the home
- Interest: The cost of borrowing money, expressed as a percentage of the loan amount
- Taxes: Property taxes assessed by your local government
- Insurance: Homeowners insurance that protects your property from damage
If your down payment is less than 20%, you'll likely also pay for Private Mortgage Insurance (PMI).
The formula for calculating the principal and interest portion of your payment is:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1 ]
Where:
- M = Monthly mortgage payment
- P = Loan principal
- i = Monthly interest rate (annual rate divided by 12)
- n = Number of payments (loan term in years multiplied by 12)
Factors That Affect Your Mortgage Payment
Several factors influence your monthly mortgage payment:
- Home Price: The purchase price of the home directly affects your loan amount.
- Down Payment: A larger down payment means a smaller loan amount and lower monthly payments.
- Loan Term: Shorter terms (like 15 years) have higher monthly payments but lower total interest costs.
- Interest Rate: Even a small difference in interest rates can significantly impact your monthly payment and total loan cost.
- Property Taxes: Vary by location and are based on the assessed value of your home.
- Homeowners Insurance: Protects your home from damage and is required by lenders.
- PMI: Required for conventional loans with less than 20% down payment.
- HOA Fees: If your property is in a homeowners association, these fees are added to your monthly expenses.