How This Mortgage Calculator Works
A mortgage payment has multiple components. This calculator computes your complete monthly obligation — commonly called PITI — covering property taxes, homeowners insurance, PMI, HOA fees, and other costs.
Down Payment & PMI Explained
The down payment is the cash you pay upfront at closing. If it's under 20% of the purchase price, lenders typically require Private Mortgage Insurance (PMI) — typically 0.5–1% of the loan annually — which can be cancelled once you reach 20% home equity.
The Amortization Formula
The P&I component uses the standard amortization formula:
M = monthly P&I | P = loan principal | r = monthly rate (APR÷12) | n = total payments
All other costs (taxes, insurance, PMI, HOA) are calculated separately and summed monthly.
15-Year vs 30-Year Mortgage
| Factor | 15-Year | 30-Year |
|---|---|---|
| Monthly P&I | Higher (~40% more) | Lower |
| Total Interest | 50–60% less | Full amount |
| Equity Speed | Fast | Slow early on |
| Typical Rate | ~0.5–0.75% lower | Baseline |
| Best For | Higher-income buyers | First-time / cash-flow buyers |
Frequently Asked Questions
What is PITI and why does it matter?
PITI stands for Principal, Interest, Taxes, and Insurance — the four core components of a mortgage payment. Lenders use it to assess affordability. Most require PITI to be under 28% of gross monthly income (the "front-end" debt-to-income ratio).
When is PMI required and how do I remove it?
PMI is required when your loan-to-value ratio exceeds 80% (i.e., down payment under 20%). Under the US Homeowners Protection Act, PMI must be cancelled when your balance reaches 78% of the original purchase price. You can also request removal at 80% LTV.
How is property tax calculated in this tool?
Enter your local property tax rate as a percentage of home value. The calculator multiplies that rate by your home price and divides by 12 to get the monthly amount. Most lenders collect taxes via an escrow account. The US national average effective rate is approximately 1.1%.
Does a larger down payment always make sense?
Not necessarily. A larger down payment reduces your monthly payment and eliminates PMI, but it also depletes cash reserves. If mortgage rates are low, investing that capital elsewhere may yield higher returns. The 20% threshold is a practical target for avoiding PMI; beyond that, the decision depends on your liquidity needs and investment goals.
How does my credit score affect the mortgage rate?
Your credit score is one of the most influential factors in the rate you're offered. Borrowers with scores above 760 typically qualify for the best rates. Each 20-point drop below that threshold can add 0.1–0.5% to your rate, costing tens of thousands of dollars over a 30-year loan. Improving your score before applying is one of the most effective ways to reduce total mortgage cost.
What is an amortization schedule?
An amortization schedule shows exactly how each payment is split between principal and interest over the life of the loan. In the early years, most of each payment covers interest. Over time, the ratio shifts — by the final years, the vast majority of each payment reduces principal. This tool shows the year-by-year breakdown above.