Mortgage Calculator 2021
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The following Mortgage Payment Calculator will help determine your monthly mortgage payments based on home price, down payment, mortgage interest rate, and term of the mortgage. Our calculations include principal, interest, property taxes, homeowner’s insurance, HOA fees, and mortgage insurance premiums (PMI).
Monthly Mortgage Payment Calculator
Amortization Schedule
Mortgage Calculator Calculations
What costs does the monthly mortgage payment include?
Our mortgage calculator provides your total monthly mortgage payment which includes the loan repayment and interest along with other expenses. However, in order to understand how the payment is calculated it is essential to know what the monthly mortgage payment consists of:
- Principal & Interest - the majority of the payment is the repayment of the loan and interest, which is determined by the process of amortization.
- Additional Costs –Mortgage Insurance (PMI or FHA MIP), property taxes, homeowners insurance, and HOA fees.
How to calculate mortgage payment?
The first step is to calculate the principal and interest using amortization. Amortization is the process that takes a loan and determines the equal periodic payments that are made to repay the principal and additional interest on the loan. The formula used to calculate the monthly payment using amortization is as follows:
M = Monthly Mortgage Payment
P = Mortgage Principal
r = Mortgage Rate (monthly)
n = Term of Mortgage (months)
Example: 400,000 Loan Amount
| Loan Amount (P) | $400,000 |
| Mortgage Rate (r) | 2% annual or 0.16% monthly |
| Term (n) | 30 years or 360 months |
The following amortization calculation includes both principal repayment and interest. Use our amortization calculator to try more examples and learn more about the amortization process.
How to calculate mortgage interest?
The above amortization formula provides both principal and interest, however, interest can be calculated separately also. The following formula is used:
Interest per month = Remaining Mortgage Balance * Mortgage Rate
Interest per month keeps changing as more and more of the loan balance is paid off. Initially, a larger portion of the monthly mortgage payment is interest payment and less principal repayment. As the loan progresses, interest payments are smaller than principal repayment. This can be visually understood using our mortgage interest calculator.
If the mortgage rate is too high for you, you should shop around at different lenders to get the best deal. The next option is to consider mortgage discount points, as discount points can be purchased as part of closing costs to reduce your mortgage rate. 1 discount point costs 1% of the mortgage amount and reduces the mortgage rate by 0.25%. A mortgage discount point calculator can help you determine if this is worth it for you.
How to calculate monthly mortgage payment?
The first step of the process as shown above involved the calculation of principal and interest. The second step is to determine the total monthly mortgage payment. This is done by adding mortgage insurance if the minimum down payment is less than 20%, along with property taxes, homeowners insurance, and HOA Fees.
Example: Monthly Mortgage Calculation
| Principal and Interest Payment | $1,478 |
| Mortgage Insurance | $188 |
| Property Tax | $527 |
| Homeowners Insurance | $192 |
| HOA Fees | $15 |
| Total Monthly Mortgage Payment | $2,400 |
Frequently Asked Questions (FAQ)
How much mortgage can I afford on my salary?
How much house you can afford is directly tied to your income level and the amount of debt that you owe. The debt-to-income (DTI) ratio plays a very important role in determining how much house you can afford. The DTI ratio looks at the percentage of your gross monthly income that goes towards monthly debt repayments. For example, if your monthly income is $5,000 and $2,000 goes towards debt payments, your DTI ratio is 40% ($2,000/$5,000).
The general rule of thumb is to get a monthly mortgage payment that will keep your total DTI ratio below 36%. However, government-sponsored programs can go up to 43% and conventional mortgage lenders can even hit a 50% DTI ratio. Therefore, the decision comes down to you, whether you are willing to take on more debt for a pricier home or keep debt low and sacrifice on the home you purchase.
Check out our home affordability calculator to get a better idea of how much house you can afford.
How much can I get pre-approved for?
Once you know what range you can afford, you can reach out to a lender to get pre-approved. Pre-approval is a formal process where you submit documents to a loan officer and receive an actual estimate of how much they could potentially lend you.
Pre-approval is extremely useful in getting an advantage over other buyers as it shows the seller that you have financing available. This can help you during closing and shorten the process for you and the seller of the home. Check out how much you can get pre-approved for using our pre-approval calculator.
Should I get a 15-year or 30-year mortgage?
It is essential for you to determine whether you want a shorter mortgage or a longer mortgage. A shorter mortgage results in higher monthly mortgage payments as compared to a longer mortgage where your monthly payments are smaller. However, the trade-off is that in a shorter mortgage, the total interest paid over the life of the loan is smaller than a longer mortgage where more total interest is paid. This can be demonstrated using our 15-year vs 30-year mortgage calculator.
Therefore, you need to decide whether you want larger monthly mortgage payments, but with less total interest paid, or smaller monthly mortgage payments and more total interest paid over the mortgage term.
Should I increase my mortgage payment and pay off my mortgage early?
Early mortgage payoff can be a great way to reduce debt and own your home sooner rather than later. The process involves increasing your monthly mortgage payment to increase principal repayments. As more and more funds are going towards reducing the principal, the interest paid on future payments also reduces, thereby reducing the total interest paid over the life of the loan. There are several restrictions around early mortgage pay-off so be sure to check with your lender if you are allowed to prepay your mortgage.
Do government-insured loans have the same mortgage calculations?
Yes, the manner in which monthly mortgage payments are calculated for conventional loans is the same for government-backed mortgages such as FHA loans, VA loans, and USDA loans.
However, each loan program has different additional payments such as FHA loans that have the FHA Mortgage Insurance Premium (MIP) which is calculated differently than Private Mortgage Insurance (PMI). To determine your FHA mortgage payment, use our FHA loan calculator. VA loans have the VA funding fee, hence, using a VA loan calculator can provide an accurate monthly mortgage payment.
Do refinance mortgage payments have the same mortgage calculations?
Yes, mortgage refinance monthly mortgage payments are calculated the same way as an original mortgage. The payment can change based on the change in length of the mortgage, lower mortgage refinance rates, and if you decide to take out a cash-out refinance. Mortgage refinancing is not free, as it will also include refinance closing costs.
Will a home equity line of credit (HELOC) Increase my mortgage payment?
A HELOC does not increase your monthly mortgage payment as it involves a separate repayment structure. A home equity line of credit (HELOC) allows homeowners to borrow funds from a lender based on the amount of equity they own in the home. Most lenders allow up to 80% of the loan-to-value (LTV) ratio. In order to determine what your HELOC payment will be and how it is repaid, use our HELOC payment calculator.