Mortgage Calculator

Why the payment is bigger than the quote

Mortgage quotes advertise principal and interest. The amount that leaves your account each month is usually a good deal larger, because the lender also collects property tax and homeowners insurance — and, if your deposit was under a fifth of the price, mortgage insurance too.

This calculator puts all of it in one figure, which is the number worth comparing against your budget.

Reading the results

Two figures deserve attention beyond the monthly total.

The first is total interest. Over thirty years it is often comparable to the price of the house itself. That is the cost of borrowing across three decades, and it is the number that changes most when rates or terms move.

The second is the escrow portion — tax and insurance. Unlike principal and interest, it is not fixed. Property assessments rise, premiums rise, and your payment rises with them even on a fixed-rate mortgage. Budgeting as though the whole payment is locked for thirty years is a common and expensive mistake.

How the pieces are calculated

Principal and interest come from the amortization formula applied to the price less your down payment, at one twelfth of the annual rate, over the number of months in the term.

Property tax and insurance are annual figures divided by twelve. In practice the lender holds these in an escrow account and pays the bills when they fall due, which is why they appear in the monthly payment rather than as separate invoices.

Private mortgage insurance applies when the down payment is under 20%. It is charged as an annual percentage of the loan balance, divided by twelve. This calculator applies it for the whole term, which overstates the later years — see the limitations below.

A worked example

A $420,000 home with $63,000 down — exactly 15% — at 6.4% over thirty years. The loan is $357,000, giving principal and interest of about $2,233 a month.

Add $5,040 of annual property tax ($420 a month), $1,800 of insurance ($150), and PMI at 0.6% on the balance ($178), and the real monthly cost is around $2,981. The gap between the quoted $2,233 and the actual $2,981 is the entire point of this calculator.

The 20% threshold

Reaching a 20% down payment removes mortgage insurance, which is pure cost — it protects the lender, not you. In the example above it costs $178 a month, over $2,100 a year, buying the borrower nothing.

If you are close to the threshold, compare the two scenarios here. Sometimes delaying a purchase to cross 20% saves more than the extra deposit costs. Sometimes it does not, particularly if prices or rates are moving against you.

What this does not include

• Closing costs. Typically a few percent of the price, paid up front, and not part of the monthly figure.
• PMI removal. Mortgage insurance normally ends once you reach roughly 20% equity, but it is kept for the full term here, so your real total is lower than shown.
• Rising costs. Tax and insurance are held flat. Both usually rise.
• Adjustable rates. This assumes the rate never changes.
• Maintenance. Not a mortgage cost, but a real one — a common rule of thumb is 1% of the home's value a year.
• Tax deductions. Mortgage interest may be deductible if you itemize. Our federal income tax calculator can show whether itemizing beats the standard deduction for you.