Mortgage Calculator
Calculate monthly mortgage payments, total interest, and view detailed amortization schedules
Mortgage Calculator
$
Down Payment
%
%
Loan Term
Complete Guide to Mortgages and Home Financing
A mortgage is likely the largest financial commitment most people will make in their lifetime. Understanding how mortgages work, what affects your payments, and the true cost of homeownership is essential for making informed decisions. This guide covers everything you need to know about mortgages and how to use our calculator to plan your home purchase effectively.
Mortgage payments consist of four main components, often referred to as PITI: Principal (loan balance), Interest (cost of borrowing), Taxes (property taxes), and Insurance (homeowners insurance and possibly PMI). While our calculator focuses on principal and interest, remember to budget for the full PITI payment when determining affordability.
The down payment significantly impacts your mortgage terms. A 20% down payment allows you to avoid Private Mortgage Insurance (PMI), which can add hundreds to your monthly payment. However, many loan programs accept lower down payments. FHA loans require as little as 3.5%, while VA loans may require no down payment for eligible veterans.
Interest rates are influenced by multiple factors including your credit score, down payment, loan term, and current market conditions. Even a small difference in rate can mean tens of thousands of dollars over the loan life. Fixed-rate mortgages offer payment stability, while adjustable-rate mortgages (ARMs) may start lower but can increase over time.
The loan term affects both your monthly payment and total interest paid. A 30-year mortgage has lower monthly payments but results in more total interest. A 15-year mortgage has higher payments but saves significant interest and builds equity faster. Consider your long-term financial goals when choosing a term.
Pre-approval is crucial before house hunting. It shows sellers you're serious and helps you understand your budget. During pre-approval, lenders verify your income, assets, and credit to determine how much they'll lend. This process is more thorough than pre-qualification and gives you a realistic picture of your buying power.
Frequently Asked Questions
Most lenders use the 28/36 rule: your monthly housing payment shouldn't exceed 28% of gross monthly income, and total debt payments shouldn't exceed 36%. However, consider your lifestyle, savings goals, and job stability. Just because you qualify for a certain amount doesn't mean you should borrow that much.
Fixed-rate mortgages maintain the same interest rate for the entire loan term, providing payment stability. Adjustable-rate mortgages (ARMs) start with a lower rate that can change after an initial period, potentially increasing or decreasing your payment. ARMs may be suitable for those planning to move or refinance before the rate adjusts.
While 20% down avoids PMI and provides better loan terms, it's not always necessary. Many first-time buyer programs require 3-5% down. Consider your savings, monthly budget, and local market conditions. Sometimes it's better to buy sooner with less down than wait years to save 20%.
Private Mortgage Insurance (PMI) protects lenders when borrowers put down less than 20%. It typically costs 0.5-1% of the loan amount annually. You can request PMI removal when you reach 20% equity through payments and appreciation. It automatically terminates at 22% equity based on the original amortization schedule.
Mortgage points (or discount points) are fees paid upfront to reduce your interest rate. One point typically costs 1% of the loan amount and reduces the rate by 0.25%. Whether points make sense depends on how long you'll keep the mortgage. Calculate the break-even point to see if the upfront cost is worth the monthly savings.