How this mortgage calculator works
A mortgage payment is more than the loan repayment. This calculator adds every recurring monthly cost of owning the home so you can compare it with your budget or rent. It first calculates the fixed principal-and-interest payment with the standard amortization formula, then adds one-twelfth of your annual property tax and insurance, PMI when your down payment is below 20%, and any HOA dues.
Mortgage payment formula
Total = M + Tax/12 + Insurance/12 + PMI + HOA
L is the loan amount (price minus down payment), r is the annual rate ÷ 12 and n is the number of monthly payments. PMI is estimated as the loan amount × PMI rate ÷ 12.
Ways to lower your mortgage payment
- Put 20% down to avoid PMI on a conventional loan. On a $360,000 loan, a 0.5% PMI rate adds $150 a month.
- Improve your credit score before applying. Borrowers above roughly 740 usually receive the best pricing.
- Compare lenders. Rates on the same day can differ by a quarter point or more; on $320,000 over 30 years, 0.25% is worth about $50 a month.
- Consider points. Paying discount points up front lowers the rate — worthwhile if you plan to keep the loan long enough to break even.
- Challenge your tax assessment if the assessed value is higher than comparable homes.
How much house payment is affordable?
A common guideline is the 28/36 rule: keep total housing costs under 28% of gross monthly income, and all debt payments (housing plus car, student and credit card payments) under 36%. Use our house affordability calculator to work backward from your income, or the DTI calculator to check how lenders will view your application.
Payments at different rates
| Rate ($320,000 loan) | 30-year payment | 30-year total interest | 15-year payment | 15-year total interest |
|---|---|---|---|---|
| 5.5% | $1,816.92 | $334,093 | $2,614.67 | $150,640 |
| 6% | $1,918.56 | $370,682 | $2,700.34 | $166,062 |
| 6.5% | $2,022.62 | $408,142 | $2,787.54 | $181,758 |
| 7% | $2,128.97 | $446,428 | $2,876.25 | $197,725 |
| 7.5% | $2,237.49 | $485,495 | $2,966.44 | $213,959 |
A 15-year loan has a much higher payment, but usually a lower rate as well, and it cuts total interest by more than half.
Private mortgage insurance (PMI)
Conventional loans with less than 20% down usually require PMI, typically about 0.3–1.5% of the loan amount a year depending on credit score and down payment. Under the U.S. Homeowners Protection Act, you can ask to cancel PMI when the loan balance reaches 80% of the home’s original value, and it ends automatically at 78%. FHA loans charge a mortgage insurance premium that often lasts for the life of the loan unless you put at least 10% down, which is one reason borrowers refinance later.
Fixed vs. adjustable rates
A fixed-rate mortgage keeps the same principal and interest payment for the whole term. An adjustable-rate mortgage (ARM), such as a 5/6 or 7/6 ARM, has a fixed rate for the first 5 or 7 years, then adjusts every 6 months based on a market index, within caps. ARMs can make sense if you expect to sell or refinance before the first adjustment, but payments can rise substantially afterwards.
Extra payments
Paying extra principal shortens the loan and saves interest. On the $320,000 loan at 6.5%, an extra $200 a month pays it off roughly 6–7 years early and saves more than $100,000 of interest. Making one extra payment a year — or half-payments every two weeks — has a similar effect, cutting about 5 years from a 30-year loan. Make sure your servicer applies the extra amount to principal.
Refinancing
Refinancing replaces your loan with a new one, usually to get a lower rate or change the term. Closing costs are often 2–5% of the loan, so divide them by the monthly savings to find the break-even point; if you plan to stay longer than that, refinancing may pay off. Resetting to a new 30-year term can lower the payment but extend the time you are in debt.