Mortgage calculator

Mortgage calculators provide very accurate estimates for principal and interest payments when you input correct loan terms. However, your total monthly payment will also include property taxes, homeowners insurance, and possibly PMI, which can vary significantly by location and property value.

Your monthly payment is determined by four main factors: loan amount (home price minus down payment), interest rate, loan term (15 or 30 years), and additional costs like property taxes, insurance, and PMI. Even small changes in interest rate or down payment can significantly impact your monthly payment.

Principal is the amount you borrowed to buy your home, while interest is the cost of borrowing that money. Early in your loan, most of your payment goes toward interest. As you pay down the loan, more of your payment goes toward principal, building equity in your home.

Private Mortgage Insurance (PMI) is typically required when you put down less than 20% on a conventional loan. PMI usually costs between 0.3% to 1.5% of your loan amount annually, added to your monthly payment. You can remove PMI once you reach 20% equity in your home.

Property taxes and homeowners insurance are typically included in your monthly mortgage payment through an escrow account. These costs vary significantly by location and property value. Property taxes can range from 0.3% to 2.5% of home value annually, while insurance costs depend on location, home value, and coverage level.

While 20% down eliminates PMI and reduces your monthly payment, many buyers put down less. FHA loans allow as little as 3.5% down, and conventional loans can go as low as 3%. Consider your budget, available cash for closing costs and emergencies, and whether paying PMI is worth preserving your savings.

The interest rate is the cost of borrowing money, while APR (Annual Percentage Rate) includes the interest rate plus other loan costs like origination fees, discount points, and closing costs. APR gives you a more complete picture of the loan's true cost and is better for comparing different loan offers.

A 15-year mortgage typically offers lower interest rates and saves you significant money in total interest, but has higher monthly payments. A 30-year mortgage has lower monthly payments but costs more in total interest. Choose based on your budget, financial goals, and how long you plan to stay in the home.