Mortgage Calculator

How Mortgage Payments Work

A mortgage payment has four components, often called PITI: Principal (paying down the loan), Interest (cost of borrowing), Taxes (property tax), and Insurance (homeowner’s insurance). If your down payment is less than 20%, you’ll also pay PMI (Private Mortgage Insurance).

The Mortgage Payment Formula

Where M = monthly P&I payment, P = loan amount, r = monthly interest rate, n = total number of payments.

Understanding PMI

Private Mortgage Insurance protects the lender if you default. It’s required when your down payment is less than 20% of the home price. PMI typically costs 0.3%–1.5% of the original loan amount per year. Once you reach 20% equity (through payments or appreciation), you can request PMI removal.

Property Tax & Insurance

Property taxes vary widely by location — from under 0.5% in Hawaii to over 2% in New Jersey and Illinois. Homeowner’s insurance averages about $1,800/year nationally. Both are typically escrowed into your monthly mortgage payment.

Tips for Getting the Best Mortgage Rate

• Improve your credit score. A score above 740 typically qualifies you for the best rates.
• Put 20%+ down. Eliminates PMI and signals lower risk to lenders.
• Compare at least 3 lenders. Rates can vary by 0.5% or more between lenders on the same day.
• Consider points. Paying discount points upfront can lower your rate by 0.25% per point.
• Lock your rate. Once you find a good rate, lock it — rates can move daily.