Mortgage Calculator: Estimate Loan Payments, Taxes and PMI
Updated: September 27, 2023
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How to Use a Mortgage Calculator
Buying a home is a monumental financial decision. Fortunately, our mortgage calculator provides a detailed view of your monthly payments that can help you make the best decision that accounts for your current and future financial situation. Follow these steps to utilize MoneyGeek's mortgage calculator.
Input the Home's Price
Enter the home's full purchase price.
Enter the Down Payment
Type the upfront payment amount, either in dollars or as a percentage.
Select the Loan's Term
Choose your mortgage duration (typically, 10, 15, 20, 25 or 30 years).
Input the Interest Rate
Insert the annual rate your lender is offering.
Add in any Additional Fees
You can input these as monthly or yearly amounts:
Property Tax: Usually a percentage of the home's value.
Homeowners Insurance: Coverage cost for property damage.
Private Mortgage Insurance (PMI): Applicable if the down payment is less than 20% of the home price.
HOA Fees: Input if your property belongs to a homeowners association.
Review and Understand
The calculator presents an itemized monthly estimate: principal, interest, taxes, insurance and fees. View the amortization schedule to see how each payment divides between principal and interest, showcasing the decreasing loan balance.
Experiment With Different Values
Change the input values (for example, increase the down payment or adjust the loan term) to observe variations in monthly costs.
Disclaimer: This tool provides general estimates. Consult a mortgage expert for personalized, accurate advice.
While online mortgage calculators are go-to tools for most people looking to find out their principal and interest (P&I) payment, knowing how to calculate this yourself can provide you with deeper insight into your home loan. Here’s a breakdown of how to calculate your monthly mortgage payment using various methods:
Calculating by Hand Using the Mortgage Payment Formula:
Use the following formula to calculate your monthly mortgage payment:
M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]
Where:
M = Monthly mortgage payment
P = Principal loan amount (the amount you borrowed)
i= Monthly interest rate (your annual interest rate divided by 12)
n = Number of months required to repay the loan (loan term in years multiplied by 12)
Calculating Using Microsoft Excel or Google Sheets:
You can also use the PMT formula in Excel or Google Sheets to calculator your P&I payment:
=PMT(i, n, P)
Where:
i = Monthly interest rate (your annual interest rate divided by 12)
n = Number of payments (loan term in years multiplied by 12 months)
P = Principal loan amount (with a negative number representing the amount borrowed)
How to Determine if a Mortgage Is Affordable
Buying a house is one of the most significant financial investments you'll make, so it's important to understand what you can comfortably afford. Start with a detailed review of your monthly income and expenses. A common guideline is that your mortgage payment — encompassing principal, interest, taxes and insurance — shouldn't cost more than 28% of your pretax monthly income. Additionally, consider the impact of other expenses, like property taxes, maintenance costs, utility bills and HOA fees. The following common homebuyer profiles help illustrate this 28% rule in action.
Types of Mortgages to Consider
Understanding the different types of home loans that are available can be enormously helpful when you're in the market for a new home or looking to refinance your current one. The following are some of the most common mortgage options available:
Fixed-Rate Mortgage (FRM): The most traditional type of mortgage, an FRM has a constant interest rate and monthly payments that never change. These loans are typically available in 15, 20 or 30-year terms. FRMs are ideal for those who plan to stay in their home long-term since they offer stability in monthly payments.
Adjustable-Rate Mortgage (ARM): With an ARM, the interest rate is fixed for an initial period (typically, five, seven or 10 years) and then adjusts periodically based on a specific index. ARMs can offer lower initial interest rates than fixed-rate mortgages, but they carry the risk of the rate (and your monthly payment) increasing in the future.
Federal Housing Administration (FHA) Loan: Backed by the Federal Housing Administration, FHA loans are designed for borrowers with low to moderate incomes. These loans require a lower minimum down payment and have more lenient credit requirements than conventional loans.
VA Loan: For eligible veterans, active-duty service members and some members of the National Guard and Reserve, the VA Loan program offers mortgages with no down payment and competitive interest rates. The U.S. Department of Veterans Affairs backs these loans.
USDA Loan: Sponsored by the U.S. Department of Agriculture, these loans are designed for rural homebuyers and offer 100% financing, meaning no down payment is required. Eligibility is based on the location of the property and the buyer's income.
Interest-Only Mortgage: This type of mortgage allows you to pay only the interest for a set period, usually five to 10 years. After this period, you'll start paying both principal and interest, which can significantly increase your monthly payments.
Jumbo Loan: A jumbo loan is a mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency (FHFA). They are designed for homebuyers looking to purchase high-priced or luxury homes.
Balloon Mortgage: With this type of loan, you'll have lower monthly payments for a set period, after which the remaining balance is due in full. It's a riskier option and best suited for those expecting to sell or refinance before the balloon payment is due.
When considering a home loan, evaluate your current financial situation, long-term plans and risk tolerance. Consulting with a mortgage broker or lender can also yield more in-depth insights into which type of loan is the best fit for you.
How to Secure Lower Monthly Mortgage Payments
Owning a home is a rewarding journey, but the thought of high monthly payments can be daunting. Fortunately, there are strategies to make this financial commitment more manageable. MoneyGeek outlined some possible strategies to lower your monthly mortgage payment below:
Frequently Asked Questions About Mortgages
Monthly mortgage payments are primarily based on the loan amount, interest rate and term. The calculation involves determining how much you'll pay in interest and principal over the loan's duration, divided into equal monthly amounts.
A typical monthly mortgage payment includes the principal (the amount borrowed), interest, property taxes and homeowner's insurance. If your down payment is less than 20%, you may also have private mortgage insurance (PMI) included.
The interest rate is a significant factor in determining your monthly payment. A higher rate means more interest accrued over the loan's life, leading to higher monthly payments. Conversely, a lower rate will decrease the monthly payment.
The principal is the original amount borrowed, while interest is the cost charged by the lender for borrowing that money. Over time, a portion of your monthly payment reduces the principal balance, while the rest covers the interest accrued for that period.
Yes, many mortgage calculators allow you to factor in property taxes and homeowners insurance to give a more accurate estimate of your total monthly payment.
A larger down payment reduces the loan amount you need to borrow, which, in turn, reduces your monthly payment and total interest paid over the life of the loan.
PMI is insurance that protects the lender if the borrower defaults on the loan. It's typically required when a borrower puts down less than 20% on a home. PMI rates can vary but are generally calculated as a percentage of the loan amount.
The calculated amount provides an estimate. Actual payments might differ due changes in property tax assessments, insurance premium adjustments or variations in PMI.
A shorter loan term will have higher monthly payments but less interest over the loan's life. Conversely, a longer loan term will have lower monthly payments but result in more interest paid overall.
Yes, many mortgage calculators accommodate ARMs. However, remember that with ARMs, your interest rate and payment can change after the initial fixed period, affecting future monthly payments.
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