Mortgage Calculator
Calculate your monthly mortgage payments and see how factors like interest rates, down payment, and loan term affect your total cost of homeownership.
Property Details
Loan Details
Additional Costs
Applies if down payment is below 20%
Mortgage Payment Summary
Monthly Principal & Interest
$1,590.81
Base loan payment
Property Tax & Insurance
$450
No PMI required
Total Monthly Payment
$2,040.81
All costs included
Loan Amount
$280,000
20.0% down payment
Monthly Payment Breakdown
Loan Balance Over Time
Mortgage Cost Summary
| Home Price | Down Payment | Loan Amount | Total Interest | Total Cost |
|---|---|---|---|---|
| $350,000 | $70,000 (20.0%) | $280,000 | $292,690.2 | $734,690.2 |
Total cost includes principal, interest, property taxes, insurance, and PMI over the full loan term.
Understanding Mortgage Payments
What Goes Into Your Mortgage Payment?
Your monthly mortgage payment typically consists of four main components, often referred to as PITI:
- Principal: The amount that goes toward paying down your loan balance.
- Interest: The cost you pay to the lender for borrowing the money.
- Taxes: Property taxes collected by your lender and held in escrow.
- Insurance: Homeowner's insurance and potentially private mortgage insurance (PMI).
Amortization: How Your Loan Balance Changes Over Time
When you first start making payments on your mortgage, a larger portion goes toward interest rather than principal. This is known as amortization, and it means that your payments remain the same throughout the life of the loan, but the way they're applied changes.
As time passes, more of each payment goes toward reducing your principal balance, helping you build equity faster in the later years of your loan.
Private Mortgage Insurance (PMI)
If your down payment is less than 20% of the home's purchase price, lenders typically require PMI. This insurance protects the lender if you default on the loan. The cost of PMI usually ranges from 0.3% to 1.5% of your loan amount annually and is added to your monthly payments. Once you've built 20% equity in your home, you can typically request to have PMI removed.
Mortgage Strategies That Can Save You Thousands
15-Year vs. 30-Year Mortgage
While 30-year mortgages are more popular due to their lower monthly payments, 15-year mortgages offer significant interest savings:
Example:
On a $300,000 mortgage at 5% interest:
• 30-year: $1,610/month with total interest of $280,000
• 15-year: $2,372/month with total interest of $127,000
Savings with 15-year: $153,000 in interest
The tradeoff is higher monthly payments but substantial interest savings and faster equity building.
Making Extra Payments
Adding just a little extra to your monthly payment can significantly reduce your loan term and interest paid:
Example:
On a $300,000, 30-year mortgage at 5%:
• Standard payment: $1,610/month
• Adding $200/month extra: Saves $58,000 in interest and pays off loan 5 years early
• Making one extra payment per year: Saves $46,000 and cuts 4 years off your loan
Before making extra payments, check that your mortgage doesn't have prepayment penalties.
Down Payment Strategies
Your down payment affects your loan amount, interest rate, and whether you'll need PMI:
- 20% down: Avoids PMI and lowers your overall loan amount
- 5-10% down: Requires PMI but gets you into a home sooner
- FHA loans: Allow down payments as low as 3.5% with mortgage insurance
- VA and USDA loans: May offer 0% down payment options for those who qualify
Consider your overall financial situation when deciding how much to put down. A larger down payment means lower monthly costs, but don't deplete your emergency savings.
Refinancing Opportunities
Refinancing can be beneficial when:
- Interest rates drop significantly below your current rate
- Your credit score has improved substantially since securing your original loan
- You want to switch from an adjustable-rate to a fixed-rate mortgage
- You need to remove a co-borrower from the loan
- You want to eliminate PMI after building sufficient equity
Remember that refinancing comes with closing costs (typically 2-5% of the loan amount), so you'll need to calculate your break-even point to determine if it's worthwhile.
5 Actionable Steps to Secure a Better Mortgage
- 1
Improve Your Credit Score
Increasing your credit score by even 20-40 points can qualify you for a better interest rate. Pay down debt, especially credit cards, and avoid applying for new credit in the months before applying for a mortgage.
Example: Improving your score from 680 to 740 could reduce your rate by 0.5%, saving $30,000 over the life of a $300,000 loan.
- 2
Shop Around for the Best Rate
Contact at least 3-5 lenders within a 14-day period (which counts as a single credit inquiry). Compare not just interest rates but also closing costs, lender fees, and loan terms.
Example: A 0.25% difference in interest rates on a $300,000 mortgage means about $15,000 in savings over 30 years.
- 3
Consider Different Loan Types
Don't assume a conventional 30-year fixed mortgage is your only option. Explore FHA, VA, USDA, and jumbo loans, as well as 15-year or 20-year terms if your budget allows.
Example: If you're a veteran, a VA loan could save you thousands by eliminating the need for a down payment or PMI.
- 4
Save for a Larger Down Payment
If possible, aim for at least 20% down to avoid PMI. This could mean delaying your home purchase by a year or two, but the long-term savings can be substantial.
Example: On a $300,000 home, increasing your down payment from 10% to 20% eliminates approximately $150/month in PMI costs.
- 5
Lock In Your Rate at the Right Time
Once you find a good rate, consider locking it in, especially if rates are rising. Rate locks typically last 30-60 days, giving you time to close on your home without risking a rate increase.
Example: A rate lock could protect you from a 0.25% increase during the home buying process, potentially saving $15,000 over the life of your loan.
Common Mortgage Mistakes to Avoid
Not Shopping Around for Rates
Many borrowers accept the first rate they're offered, costing them thousands. Even a 0.25% difference in interest rate can save $15,000 over the life of a $300,000 loan. Always get quotes from at least 3-5 lenders within a 14-day window to ensure you're getting the best deal.
Focusing Only on Monthly Payment
While monthly payment is important, don't ignore the total interest paid over the life of the loan. A 30-year mortgage at 5% costs $279,767 in interest on a $300,000 loan, while a 15-year mortgage at 4.5% costs only $127,544 in interest despite higher monthly payments.
Draining Your Emergency Fund for Down Payment
While a 20% down payment eliminates PMI, don't deplete your emergency savings. Keep at least 3-6 months of expenses in reserve for unexpected costs. It's better to pay PMI temporarily than to be financially vulnerable after closing.
Skipping the Pre-Approval Process
Getting pre-approved (not just pre-qualified) gives you a realistic budget and makes you a more attractive buyer. Pre-approval involves a thorough credit check and income verification, showing sellers you're a serious buyer who can actually close on the home.
State-Specific Mortgage Considerations
High-Tax States
States like New York, California, and New Jersey have higher property taxes that significantly impact your monthly payment:
- New York: Average property tax rate of 1.69% - adds ~$420/month on a $300,000 home
- California: Average rate of 0.75% but higher home values - varies significantly by county
- New Jersey: Highest property tax rate at 2.49% - adds ~$620/month on a $300,000 home
Low-Tax States
States with lower property taxes can make homeownership more affordable:
- Delaware: Average rate of 0.57% - saves ~$280/month compared to NY on a $300,000 home
- Hawaii: Low rate of 0.31% but higher home values offset the benefit
- Alabama: Average rate of 0.41% - very affordable property taxes
First-Time Buyer Programs by State
Many states offer special programs for first-time homebuyers:
- Texas: My First Texas Home - 0% down payment loans
- Florida: Florida Housing - down payment assistance up to $15,000
- Ohio: Ohio Housing - grants up to $5,000 for down payments
- Virginia: VHFA - below-market interest rates
- North Carolina: NC Housing - 3% down payment assistance
- Colorado: CHFA - down payment assistance up to $12,000
Expert Review by Michael Brooks, CFP®
Certified Financial Planner | 15+ Years in Mortgage & Financial Planning
Michael Brooks is a Certified Financial Planner® with over 15 years of experience in mortgage financing and financial planning. He has helped thousands of families navigate the home buying process and optimize their mortgage strategies. Michael holds a Bachelor's degree in Finance from the University of Michigan and is a member of the Financial Planning Association.
"The mortgage calculator above provides accurate estimates, but remember that your actual rate and terms will depend on your credit score, debt-to-income ratio, and current market conditions. Always consult with a qualified mortgage professional before making final decisions."
Frequently Asked Questions
How much home can I afford?
Financial experts generally recommend that your monthly housing costs (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36%. However, these are guidelines, not rules. Consider your personal financial situation, including savings, job stability, and other financial goals when determining how much house you can comfortably afford.
Should I choose a fixed-rate or adjustable-rate mortgage (ARM)?
Fixed-rate mortgages offer stability with the same interest rate and monthly payment for the entire loan term. ARMs typically start with a lower interest rate for a fixed period (e.g., 5, 7, or 10 years) before adjusting periodically based on market indexes. Consider an ARM if you plan to move or refinance before the initial fixed period ends, or if interest rates are high and expected to fall. Choose a fixed-rate mortgage for long-term stability and if current rates are relatively low.
How do points work on a mortgage?
Points (or discount points) are fees paid directly to the lender at closing in exchange for a reduced interest rate. Each point costs 1% of your mortgage amount. For example, one point on a $300,000 mortgage would cost $3,000. Buying points can make sense if you plan to keep the loan for a long time, as you'll eventually recoup the upfront cost through lower monthly payments. Calculate your break-even point by dividing the cost of the points by your monthly savings.
What costs are included in closing costs?
Closing costs typically range from 2% to 5% of the loan amount and include: lender fees (application, origination, underwriting), third-party fees (appraisal, credit report, title search, title insurance), prepaid items (property taxes, homeowners insurance), escrow fees, and in some cases, private mortgage insurance. Ask your lender for a Loan Estimate, which outlines all closing costs, and later a Closing Disclosure, which provides the final figures.
How often can I refinance my mortgage?
There's technically no limit to how many times you can refinance your mortgage. However, each refinance comes with closing costs that typically take a few years to recoup through monthly savings. Some lenders have waiting periods (often 6 months) between refinances, and certain government-backed loans have specific seasoning requirements. Before refinancing, calculate whether the long-term savings will outweigh the immediate costs.
What credit score do I need for a mortgage?
While you can get a mortgage with a credit score as low as 500-580 (for FHA loans), better rates are available with higher scores. Conventional loans typically require a minimum score of 620, while the best rates are reserved for scores of 740 and above. If your score is below 620, consider working on improving it before applying, as even a 40-point increase can significantly reduce your interest rate and monthly payments.
What's the difference between pre-qualification and pre-approval?
Pre-qualification is a quick estimate based on self-reported information about your income, debts, and assets. Pre-approval is more thorough and involves a credit check, income verification, and asset documentation. Pre-approval carries more weight with sellers and gives you a realistic budget. Most real estate agents recommend getting pre-approved before house hunting to avoid disappointment and strengthen your negotiating position.
Should I pay off my mortgage early?
Whether to pay off your mortgage early depends on your interest rate, other debts, and investment opportunities. If your mortgage rate is below 4-5%, you might earn more by investing extra money instead of paying down the mortgage. However, if you have high-interest debt (credit cards, personal loans), pay those off first. The peace of mind from owning your home outright is also valuable and worth considering alongside the financial calculations.
What happens if I can't make my mortgage payments?
If you're struggling with mortgage payments, contact your lender immediately. Many lenders offer forbearance, loan modifications, or repayment plans to help borrowers through temporary financial difficulties. Ignoring the problem will only make it worse. You may also want to consult with a HUD-approved housing counselor who can help you understand your options and negotiate with your lender at no cost to you.
How does my debt-to-income ratio affect my mortgage?
Your debt-to-income ratio (DTI) is calculated by dividing your total monthly debt payments by your gross monthly income. Most lenders prefer a DTI of 43% or lower, though some conventional loans allow up to 50% with strong credit and reserves. To improve your DTI, pay down existing debts before applying for a mortgage, or consider increasing your income through a side job or asking for a raise.
What's the best mortgage term length?
The most common mortgage terms are 15 and 30 years, though 20 and 25-year options exist. A 30-year mortgage offers lower monthly payments but costs more in total interest. A 15-year mortgage builds equity faster and saves significantly on interest but requires higher monthly payments. Choose based on your budget, financial goals, and how long you plan to stay in the home. You can always make extra payments on a 30-year mortgage to pay it off faster without committing to the higher payment of a 15-year loan.
Can I get a mortgage if I'm self-employed?
Yes, but self-employed borrowers face additional documentation requirements. You'll typically need to provide two years of tax returns, profit and loss statements, and bank statements. Lenders may use the average of your last two years' adjusted gross income to determine your qualifying income. Consider working with a loan officer experienced in self-employed mortgages, and be prepared for a potentially longer approval process.
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