Mortgage Calculator

How to use this calculator

1. Enter the home price and your down payment. The difference is what you borrow.
2. Enter the interest rate and the term, normally 30 or 15 years.
3. Enter the property tax rate as an annual percentage of the home’s value, the annual home insurance premium, and any monthly HOA fee.

The large figure is what actually leaves your bank account each month. The breakdown underneath shows how much of it is the loan and how much is everything else.

How the calculation works

The loan portion uses the standard amortisation formula:

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

where A is the amount borrowed, i is the monthly interest rate, and n is the number of monthly payments.

The other components are simpler but easy to get wrong:

• Property tax is a percentage of the home’s value, not of the loan, divided by 12.
• Home insurance is an annual premium divided by 12.
• HOA fees are already monthly and are added as-is.

That first point matters more than it looks. A bigger down payment reduces your loan, your interest and your monthly principal-and-interest — but it does not reduce your property tax by a single dollar.

A worked example

A $420,000 home with $84,000 down (20%), at 6.5% over 30 years, in an area with a 1.1% property tax rate and $1,800 annual insurance.

You borrow $420,000 − $84,000 = $336,000. The monthly rate is 6.5% ÷ 12 = 0.541667%, and there are 360 payments.

P = 336000 x 0.00541667 / (1 - 1.00541667^-360)
P = 1820.00 / 0.856872
P = 2123.75

Now the escrow:

• Property tax: $420,000 × 1.1% = $4,620 a year, or $385 a month
• Insurance: $1,800 ÷ 12 = $150 a month

Component	Monthly
Principal & interest	$2,123.75
Property tax	$385.00
Insurance	$150.00
Total	$2,658.75

The loan itself is only 80% of what you pay. The tax and insurance add $535 a month, which is $6,420 a year and $192,600 over the full term — and unlike the mortgage, they never end.

Over 30 years the principal and interest alone total $764,550, meaning $428,550 of interest on a $336,000 loan. You repay more than twice what you borrowed.

Common mistakes to avoid

Budgeting from the principal and interest figure. This is the number lenders quote and the number most calculators show. It understates the real cost by 20 to 25 percent on a typical US purchase. If you budgeted $2,124 and the actual payment is $2,659, that gap will hurt every month for thirty years.

Forgetting private mortgage insurance. With less than 20 percent down, expect PMI of roughly 0.5 to 1.5 percent of the loan annually — on a $380,000 loan that is another $160 to $475 a month. It is not included above. It can usually be cancelled once you reach 20 percent equity, so it is temporary, but it is very real in the early years.

Assuming the tax bill stays put. Property assessments rise, and in many areas they rise faster than general inflation. A payment that is comfortable at today’s assessment can become uncomfortable after a reassessment, particularly in a rising market.

Comparing a 15-year and a 30-year on the monthly payment alone. The 15-year costs far less in total and usually carries a slightly lower rate, but the payment is much higher. A useful middle path is taking the 30-year and paying extra voluntarily: you capture most of the interest saving while keeping the right to fall back to the lower required payment if your income changes.

When this calculator is not the right tool

It assumes a fixed rate for the whole term. For an adjustable-rate mortgage, run the numbers again at the maximum rate the cap allows, because that is the payment you are actually agreeing to be liable for.

It also excludes closing costs, points, PMI, maintenance and utilities. A common planning rule is to budget 1 to 2 percent of the home’s value annually for maintenance — on this example, another $350 to $700 a month that no mortgage calculator will show you.

For a car, a personal loan or anything without escrow, use the general loan calculator instead.