Mortgage Payment Calculator

What your monthly mortgage payment is made of

A mortgage payment is rarely just the loan. Most homeowners write one cheque each month that covers four or five separate things, and the loan itself is often less than three quarters of it. The four core pieces are principal, interest, taxes and insurance, which lenders abbreviate as PITI. Add homeowners association dues and private mortgage insurance and you have the number that actually leaves your bank account.

Principal is the portion that reduces what you owe. Interest is the lender's charge for the outstanding balance. Property taxes and homeowners insurance are usually collected monthly into an escrow account and paid on your behalf when the bills come due. HOA dues, if your property has them, are paid directly to the association and are not part of the loan at all, but they are still a fixed housing cost.

The amortisation formula

The principal and interest portion comes from the standard amortisation formula:

M = P x i / (1 - (1 + i)^-n)

Here M is the monthly principal and interest payment, P is the amount borrowed, i is the monthly interest rate, which is the annual rate divided by twelve, and n is the total number of monthly payments. On a 30 year loan n is 360. The formula produces a level payment, but the split inside that payment shifts every month. Early on, most of it is interest because interest is charged on a large balance. Late in the term almost all of it is principal.

This front loading is why paying a little extra in the first years has an outsized effect. Every extra dollar applied to principal removes all the future interest that dollar would have generated for the rest of the term.

Why PMI matters and when it drops off

Private mortgage insurance protects the lender, not you, and it is typically required when your down payment is less than 20 percent. It is quoted as an annual percentage of the loan balance, commonly between roughly 0.3 and 1.5 percent depending on credit score and loan to value ratio.

PMI generally applies while the loan balance is above 80 percent of the home value. Once amortisation, extra payments or appreciation bring the balance to that level, borrowers can usually request cancellation, and servicers are generally required to terminate it automatically at 78 percent of the original value based on the original payment schedule. That threshold matters because PMI buys you nothing. On a 360,000 dollar loan at 0.6 percent it is about 180 dollars a month, roughly 2,160 dollars a year, that does not reduce your balance or build equity. Reaching 80 percent sooner is one of the clearest returns available to a homeowner.

Term length and total interest

A 15 year loan carries a noticeably higher monthly payment but a dramatically lower total interest cost, often less than half that of a 30 year loan at a similar rate. A 30 year loan buys flexibility and a smaller required payment. Neither is universally correct. The tradeoff is between monthly cash flow and lifetime cost, and the right answer depends on your income stability, other debts, and what else you would do with the difference.

What this calculator does not include

• Closing costs, origination fees and prepaid escrow deposits.
• Future property tax reassessments and insurance premium increases.
• FHA, VA or USDA specific premiums and funding fees.
• Maintenance, utilities and repairs, which are real costs of ownership.

Use the result to compare scenarios rather than as a quote. Change the down payment, the term and the rate and watch which lever moves the number most. Then take your shortlist to a lender for an official Loan Estimate, and speak with a qualified mortgage professional, tax adviser or financial planner before committing. Nothing here is advice. See our terms of use for the full disclaimer.