Mortgage Calculator

What "PITI" Means

Most US mortgage payments bundle four components, often abbreviated PITI: Principal, the portion of your payment that pays down the loan balance; Interest, the lender's charge for borrowing the money; Taxes, property tax, usually collected monthly and held in an escrow account until the annual bill is due; and Insurance, homeowners insurance, also often escrowed the same way. This calculator estimates all four together for a realistic total monthly payment, not just the loan portion, since focusing only on principal and interest significantly understates what a mortgage actually costs each month.

What Is PMI?

Private Mortgage Insurance is typically required when your down payment is less than 20% of the home price. It protects the lender, not you, in case of default, essentially compensating the lender for the added risk of a smaller equity cushion. This calculator automatically estimates PMI, roughly 0.75% of the loan amount annually, a commonly cited mid-range figure, whenever your down payment falls below the 20% threshold, and removes it automatically once you're at or above 20% down. Actual PMI rates vary by lender, credit score, and loan type, typically ranging from about 0.5% to 1.5% annually, so treat this calculator's PMI estimate as a reasonable planning figure rather than an exact quote.

A Worked Example

At the default settings, a $350,000 home with a $70,000 down payment (20%), a 6.5% interest rate, and a 30-year term produces a principal and interest payment of roughly $1,770 a month. Adding $350 a month in property tax and $125 in home insurance brings the total monthly payment to roughly $2,245, with no PMI required since the down payment meets the 20% threshold. Over the full 30-year term, total interest paid on the loan itself comes to roughly $357,125, more than the original loan amount, a normal feature of long-term, lower-monthly-payment mortgages.

How Down Payment Size Affects PMI and Total Cost

Dropping the down payment to 10%, or $35,000 instead of $70,000, on the same home increases the loan amount to $315,000, raising the principal and interest payment to roughly $1,991 and triggering an estimated $197 a month in PMI. Combined with the same tax and insurance figures, the total monthly payment rises to roughly $2,663, about $418 more per month than the 20%-down scenario, and total interest over the loan's life increases to roughly $401,765.

Beyond the higher monthly cost, PMI is also money that builds no equity and typically continues until the loan balance drops to around 80% of the home's value, at which point it can usually be requested for removal. This is why many buyers specifically target a 20% down payment when feasible, not just for the smaller loan amount, but to avoid this additional, non-equity-building monthly cost entirely.

15-Year vs 30-Year Mortgages

Choosing a shorter loan term dramatically changes the interest cost, even at the same rate and loan amount. Using the default $280,000 loan amount at 6.5%, a 30-year term produces a $1,770 monthly principal and interest payment with roughly $357,125 in total interest, while a 15-year term raises the monthly payment to roughly $2,439 but cuts total interest to roughly $159,038, less than half.

The trade-off is straightforward: a 15-year mortgage costs significantly more per month but saves a substantial amount in total interest and builds equity faster, while a 30-year mortgage keeps monthly payments lower and more manageable, which can matter more for cash flow, especially early in a career or when other financial priorities compete for the same monthly budget. Some buyers choose a 30-year mortgage but voluntarily make extra principal payments when they can, capturing some of the 15-year loan's interest savings while keeping the lower required monthly payment as a safety cushion.

Fixed-Rate vs Adjustable-Rate Mortgages

This calculator assumes a fixed interest rate for the entire loan term, meaning your rate and principal-and-interest payment never change. An adjustable-rate mortgage, or ARM, instead starts with a fixed rate for an initial period, often 5, 7, or 10 years, then adjusts periodically based on a benchmark rate, which can raise or lower your payment afterward. ARMs often start with a lower initial rate than a comparable fixed-rate mortgage, which can make sense if you plan to sell or refinance before the adjustable period begins, but they carry the risk of a higher payment later if rates rise, a risk this calculator doesn't model since it assumes a single fixed rate throughout.

How Property Tax and Insurance Escrow Works

Many lenders require property tax and homeowners insurance to be collected monthly, along with your principal and interest payment, and held in an escrow account rather than paid directly by the homeowner once a year. The lender then pays the annual property tax bill and insurance premium from that account when due. This calculator's tax and insurance fields reflect that monthly-equivalent cost, dividing the annual figures by 12, which is how most escrowed mortgage payments are actually structured, even though property tax bills themselves are typically issued annually or semi-annually by local governments.

How Extra Principal Payments Change the Math

Paying more than the required principal and interest amount each month, even a modest extra amount, directly reduces the balance that future interest is calculated on, which can meaningfully shorten a loan and reduce total interest paid, without needing to refinance into a shorter term. On the default $280,000, 6.5%, 30-year loan, an extra $200 a month toward principal can cut years off the repayment schedule and save tens of thousands of dollars in interest over the life of the loan, since every extra dollar of principal paid early avoids decades of compounding interest on that same dollar.

Before making extra payments a habit, confirm with your lender that additional payments are applied directly to principal rather than counted as an early future payment, since some loan servicers handle this differently by default, and check whether your specific loan carries any prepayment penalty, though these are relatively uncommon on standard US mortgages today.

Mortgage Points: Paying Upfront to Lower Your Rate

Some lenders offer the option to pay "points" at closing, an upfront fee, typically 1% of the loan amount per point, in exchange for a lower interest rate over the life of the loan, often around 0.25% per point, though the exact trade varies by lender. Whether paying points makes sense depends heavily on how long you plan to keep the loan: the upfront cost only pays for itself after enough months of lower payments accumulate to exceed what you paid upfront, a calculation often called the break-even point.

If you expect to sell or refinance well before that break-even point, paying points is usually not worth it. If you're confident you'll hold the loan for many years, the long-term interest savings can outweigh the upfront cost meaningfully.

Renting vs Buying: Where This Calculator Fits

This calculator estimates the monthly cost of owning a specific home once you've already decided to buy, but it doesn't answer the broader question of whether buying makes more financial sense than renting in your specific situation and market. Buying involves upfront costs like a down payment and closing costs, plus ongoing costs like maintenance, property tax, and insurance that renting doesn't carry, but it also builds equity over time and isn't subject to rent increases the way renting is. For a fuller comparison that weighs both sides side by side, including how long you'd need to stay in a home for buying to come out ahead financially, see our Rent vs Buy Calculator.

Refinancing an Existing Mortgage

If mortgage rates have dropped meaningfully since you took out your current loan, or your credit profile has improved, refinancing into a new loan at a lower rate can reduce your monthly payment or shorten your remaining term. To estimate a refinance using this calculator, enter your current outstanding loan balance as the home price with a $0 down payment, along with the new rate and term you're considering, then compare the result against your current payment.

Refinancing typically comes with its own closing costs, so it's worth calculating how many months of savings it takes to recoup those costs, the refinance break-even point, before deciding it's worthwhile, similar to the points calculation described above.

Common First-Time Homebuyer Mistakes

Getting pre-approved for the maximum amount and treating it as the target budget. A lender's pre-approval reflects what you can qualify to borrow, not necessarily what's comfortable for your actual monthly budget once other expenses and financial goals are factored in. Many financial advisors suggest keeping total housing costs, including PITI, well below the maximum a lender is willing to offer, to preserve room for savings, emergencies, and other priorities.

Budgeting only for principal and interest. Property tax, insurance, and potentially PMI can add hundreds of dollars a month beyond the loan payment itself, and overlooking them when estimating affordability is one of the most common first-time buyer mistakes.

Not shopping around for a rate. Even a 0.25% difference in interest rate can meaningfully change the total interest paid over a 30-year term, and rates can vary noticeably between lenders for the same borrower, making it worth getting quotes from multiple sources before committing.

Underestimating maintenance and closing costs. Beyond the recurring monthly payment this calculator estimates, homeownership involves one-time closing costs, typically 2-5% of the loan amount, and ongoing maintenance costs that renting doesn't carry, both worth budgeting for separately.

Frequently Asked Questions

Why do down payment dollars and percentage both appear?

They're linked, enter either one and the other updates automatically, since both represent the same underlying value relative to the home price.

Does this include closing costs?

No, this calculates ongoing monthly payments only. Closing costs are a separate one-time expense (typically 2-5% of the loan amount) paid at the time of purchase, not part of your monthly payment.

Why did my PMI estimate disappear when I raised the down payment?

PMI is typically only required when your down payment is below 20% of the home price. Once you reach or exceed that threshold, this calculator automatically removes the PMI estimate from your monthly total, matching how most lenders handle it.

Is a 15-year or 30-year mortgage better?

Neither is universally better; it's a trade-off between monthly affordability and total interest cost. A 15-year term saves substantially on interest but requires a meaningfully higher monthly payment, while a 30-year term keeps payments lower at the cost of more total interest over time.

Does this account for property tax reassessment over time?

No, it assumes your entered property tax figure stays constant. In reality, property tax bills often change over time as local assessments and rates are updated, so your actual future payments may differ from this estimate.

Can PMI be removed later?

Often yes, once your loan balance drops to around 80% of the home's value, either through payments, appreciation, or both, you can typically request PMI removal from your lender, subject to their specific requirements and verification process.