What goes into a mortgage payment
Lenders often quote only principal and interest, but most homeowners pay more than that each month. A typical payment has up to five parts, often called PITI plus extras:
- Principal: the part that pays down what you borrowed.
- Interest: the lender's charge for the loan. Early in the loan, most of each payment is interest.
- Property tax: set by your county, usually 0.5% to 2.5% of the home's value a year. Lenders often collect it monthly in an escrow account.
- Homeowners insurance: required by every lender, also commonly paid through escrow.
- PMI and HOA: private mortgage insurance if you put down less than 20%, and homeowners association dues if your community has them.
How PMI works and when it ends
On a conventional loan with less than 20% down, lenders add private mortgage insurance. It protects the lender, not you, and typically costs 0.3% to 1.5% of the loan a year. Under the federal Homeowners Protection Act you can ask to cancel PMI once your balance reaches 80% of the home's original value, and the lender must end it automatically at 78%. This calculator charges PMI only until that 78% point and shows the date it stops.
FHA loans work differently: their mortgage insurance premium usually lasts 11 years or the life of the loan, depending on your down payment.
How to use this calculator
Enter the home price, down payment, rate and term. Add your county's property tax rate and an insurance quote for the most realistic number. Use the extra-payment field to see how paying a little more each month shortens the loan and cuts total interest.
Example
A $400,000 home with 20% down leaves a $320,000 loan. At 7.107% for 30 years, principal and interest come to $2,152.01 a month. Add 1.2% property tax ($400 a month) and $1,500 a year of insurance ($125 a month), and the real monthly cost is $2,677.01, about 24% more than the quoted payment.
Frequently asked questions
How much house can I afford?
A common guideline is to keep your total housing payment, including taxes and insurance, under 28% of your gross monthly income, and all debt payments under 36%. Lenders may approve more, but leaving room in your budget makes the payment easier to live with.
Is it better to put 20% down?
Putting 20% down avoids PMI on a conventional loan and lowers your monthly payment. Putting less down gets you into a home sooner but costs more each month until PMI ends. Use the down payment field to compare both.
Why is my lender's payment different?
Lenders round to the cent, use your actual tax bill and insurance quote, and may include a cushion in escrow. Small differences of a few dollars are normal.
Does this include closing costs?
No. Closing costs, usually 2% to 5% of the loan, are paid once at closing and don't change the monthly payment unless you roll them into the loan.