Mortgage Calculator

Estimate your monthly payment and total interest based on loan amount, annual rate, and term in years.

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What this calculator does

It computes your principal and interest payment and summarizes total interest over the loan’s life.

How to calculate mortgage payment

Standard formula: M = P × r × (1+r)^n / ((1+r)^n − 1), where P is principal, r is monthly rate, n is number of payments.

Who should use this

Home buyers comparing properties and rates
Owners considering refinance options

Examples

$350,000 at 6.25% for 30 years → monthly ≈ $2,155 (P&I)
$250,000 at 5.5% for 15 years → monthly ≈ $2,043 (P&I)

Understanding Mortgage Payments

How Mortgage Payments Are Calculated

Mortgage payments are calculated using the amortization formula, which determines a fixed monthly payment that covers both principal and interest:

M = P × [r(1+r)^n] / [(1+r)^n - 1]

Where:

M = Monthly payment
P = Principal (loan amount)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (years × 12)

This formula ensures that each payment covers interest on the remaining balance and reduces the principal, with the proportion shifting over time from mostly interest to mostly principal.

Fixed-Rate vs Adjustable-Rate (ARM) Mortgages

Understanding the difference between these two mortgage types is crucial for choosing the right loan:

Fixed-Rate Mortgages

Your interest rate remains constant for the entire loan term. Advantages include:

Predictable payments that never change
Protection from rising interest rates
Easier budgeting and financial planning
Peace of mind with stable payments

Disadvantages:

Typically higher initial rates than ARMs
No benefit if rates decrease (unless you refinance)
Less flexibility if you plan to move soon

Adjustable-Rate Mortgages (ARMs)

Your interest rate can change periodically based on market conditions. Advantages include:

Lower initial interest rates
Potential savings if rates stay low or decrease
Good for short-term homeownership

Disadvantages:

Unpredictable payment amounts
Risk of significantly higher payments if rates rise
Rate caps may limit increases but don't eliminate risk
More complex to understand and plan for

Ways to Lower Your Mortgage Payment

Several strategies can help reduce your monthly mortgage payment:

1. Refinance to a Lower Rate

If interest rates have dropped since you got your mortgage, refinancing can lower your monthly payment. Consider closing costs and how long you plan to stay in the home.

2. Extend Your Loan Term

Refinancing from a 15-year to a 30-year loan (or 30-year to a longer term) reduces monthly payments but increases total interest paid over the life of the loan.

3. Make a Larger Down Payment

If you're still shopping, a larger down payment reduces your loan amount, which directly lowers your monthly payment.

4. Remove Private Mortgage Insurance (PMI)

Once you reach 20% equity, you can request PMI removal, reducing your monthly payment by the PMI amount.

5. Pay Points

Paying discount points upfront can lower your interest rate, reducing monthly payments. Calculate the break-even point to see if it's worth it.

6. Appeal Property Tax Assessment

If your property taxes are included in your payment, successfully appealing a high assessment can lower your monthly payment.

Understanding Amortization

Mortgage amortization is the process of paying off your loan through regular payments. Early in the loan term, most of your payment goes toward interest. As you pay down the principal, more of each payment goes toward reducing the loan balance.

For example, on a $350,000 loan at 6.25% for 30 years:

First payment: ~$1,823 interest, ~$332 principal
Payment 180 (15 years): ~$1,200 interest, ~$955 principal
Final payment: ~$11 interest, ~$2,144 principal

Factors Affecting Mortgage Payments

Several factors influence your monthly mortgage payment:

Loan amount: Higher principal = higher payments
Interest rate: Even small rate differences significantly impact payments
Loan term: Shorter terms mean higher monthly payments but less total interest
Property taxes: Included in escrow, varies by location
Homeowners insurance: Required by lenders, varies by property and coverage
PMI: Required if down payment is less than 20%
HOA fees: If applicable, paid separately or included in payment

Frequently Asked Questions

What's included in a mortgage payment?

A full mortgage payment (PITI) includes Principal, Interest, Taxes, and Insurance. Some lenders also include PMI and HOA fees in the monthly payment.

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage has higher monthly payments but saves significantly on interest. A 30-year mortgage offers lower payments and more flexibility. Choose based on your budget and financial goals.

How much can I save by making extra payments?

Extra payments directly reduce principal, saving interest over the loan life. For example, an extra $100/month on a $350,000 loan at 6.25% saves about $50,000 in interest and pays off the loan 5 years early.

When should I refinance my mortgage?

Consider refinancing if rates have dropped significantly (typically 0.5-1% or more), you can shorten your term, or you want to remove PMI. Calculate closing costs vs. savings to determine if it's worth it.

What is PMI and when can I remove it?

Private Mortgage Insurance protects lenders when your down payment is less than 20%. You can request removal once you reach 20% equity through payments or home value appreciation.