Mortgage payment calculator
One of the most important steps in applying for a mortgage is calculating how much home you can afford. Although homeownership comes with some hidden costs like repairs and maintenance, closing costs are often overlooked when calculating your monthly mortgage payment. Always make sure you have a list of the costs that will sum up your mortgage total.
Estimate your mortgage payments
Customize your rate
How to use the calculator
To calculate an estimate of your monthly mortgage payment, simply input the purchase price of the home, the down payment, interest rate, and the term of the loan. Then, if you'd like an even more precise estimate, you can fill in other pertinent details, such as credit score, location, whether or not the property will be your primary residence, whether the property is a single-family home, condo, or townhome, and the estimated insurance and property tax payments.
The total amount you will pay for your home is primarily affected by the following factors:
- Loan amount
- Loan amount
- Loan term
How to calculate mortgage rates
A monthly mortgage payment is usually determined through a simple formula.
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]The variables used in this formula are:
M = Monthly Payment
P = Principal (the total initial size of your loan)
i = Interest Rate of Loan
n= Number of Monthly Payments = Term of the loan in years * 12
For example:
For a $400,000 loan at 4% interest, the monthly payment would be: $1909.66
$1909.66 = 400,000 [ 0.04(1 + 0.04)^360 ] / [ (1 + 0.04)^360 – 1]What's the purpose of a mortgage calculator?
A mortgage calculator gives you a simple means of approximating how much you can expect to pay for your mortgage each month, taking into account relevant information about the loan, including the principal, interest, and term of the loan itself. The calculator allows you to adjust the rates, amounts, terms, and other information to experiment and strategize, giving yourself a better idea of how the many variables might affect your monthly expenses.
Understanding mortgages
What is a mortgage?
A mortgage is a type of secured loan where the item being financed (usually a home) is held as collateral for the loan. In other words, a person who wishes to purchase a home takes out a loan with the bank to pay for it, and in doing so, agrees that if they stop making payments on the loan before the payments are complete, the home can be repossessed by the financial institution.
Mortgages are the ideal home-buying solution for most people who can't afford to buy a home immediately out of pocket, as it allows individuals and families to spread these large expenses over a more manageable period of many years, usually into monthly payments.
What's included in a mortgage payment?
The mortgage payment that a borrower makes each month is made up of four components:
Principal: The initial amount borrowed
Interest: The accrued fees charged for borrowing
Taxes: The toll charged by government entities to property owners
Insurance: Payments to guarantee coverage of accidents or disasters that damage the property
Taken together, these elements are often called PITI. By default, our mortgage calculator will calculate your estimated monthly payment including only the principal and interest, but tax and insurance estimates can also be added to your calculation.
What is principal?
The principal is the initial amount of money that the borrower was loaned from the outset. If you receive a mortgage for your home that was worth $300,000 when you purchased it, your principal for that loan will be $300,000. However, since it is a loan, you will also pay interest on top of the principal.
What is a down payment?
A down payment is the sum home buyers will pay upfront when they make their purchase. The minimum amount a person pays in a down payment will be proportional to the size of the loan itself. Buyers can often negotiate for more favorable loan terms, including driving down the size of their monthly payments, by offering a larger down payment at the beginning.
What is a loan term?
The loan term is the period of time given to the borrower to repay the loan. When it comes to mortgages, the loan terms that are most commonly offered by financial institutions are 15, 20, and 30 years. Though a longer term might seem off-putting, these plans will necessitate more monthly payments, therefore reducing the amount payable each month. Conversely, a shorter loan term means fewer monthly payments, with higher payments each month. It is critical to consider your financial means when deciding and agreeing on loan terms.
What's an interest rate?
Interest is the fee borrowers pay to lenders each month for borrowing their money. The interest rate describes what percentage of the initial loan that the borrower will be obliged to pay, in addition to paying back the principal loan.
A borrower's interest rate will be determined by a variety of connected components, including credit scores, the size of the down payment, the type and amount of the principal loan, and market fluctuations.
What taxes are part of the monthly mortgage payment?
Owning property in the United States compels you to pay taxes on your real estate at the county and district levels. The property tax rates range anywhere from 0.57% of your home’s market value in Wyoming, all the way up to 2.42% in New Jersey.
Reducing monthly mortgage payments
If you are hoping to lower the amount you spend on a mortgage payment each month, there are a few ways to achieve this.
Extend the term of the loan
By increasing the amount of time you have to pay off the loan, you are dividing the loan across a greater amount of months, thereby leaving you with a lower payment each month.
Lower interest rate
If you have a good credit history, you may be able to qualify for a lower interest rate for your loan. Also, try shopping around to find a financial institution that can offer you the best deal while meeting your mortgage needs. See what kind of mortgage you can qualify for Use MACU’s Mortgage Qualifier Calculator to see the kinds of mortgage for which you can qualify.
Buy less house
Living within your means is the simplest method of lowering your monthly costs. A smaller home with less market value naturally costs less each month.
Avoid paying PMI
Private Mortgage Insurance (PMI) is paid by borrowers who are considered "high-risk loans" to their lenders. Generally, if you aren't able to contribute a down payment of more than 20% of the home's value, most lenders will prefer to have you pay for PMI through an escrow account. If you can maximize your down payment, you will not only lower your monthly payments by taking care of a significant portion of the debt upfront, but also by avoiding PMI payments.
*Loans on approved credit. Actual APR based on creditworthiness. Information and interactive calculators are made available as self-help tools for independent use and are not intended to provide investment advice. We cannot and do not guarantee their applicability or accuracy in regard to individual circumstances. All examples are hypothetical and are for illustrative purposes. Seek personalized advice from qualified professionals regarding all personal finance issues. Actual rate, payment and costs could be higher. Get an official loan estimate before choosing a loan. Some limitations on loan amounts may apply based on county limits and/or loan product. FHA county loan limits apply for FHA loans.
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