Mortgage Payment Calculator
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FREE Mortgage Calculator
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Nothing is quite as exciting as preparing to buy a house. Before you get to the fun part of shopping for a home, you need to plan your finances. That’s where PropertyChecker’s FREE mortgage calculator, a tool designed for your ease and convenience, comes in handy!
A mortgage calculator is a tool that helps you determine how much of a mortgage you can afford and what your payments will look like. It breaks down principal and interest, and shows how other costs like PMI, and escrow amounts factor in. How much you can afford when buying a house depends on the loan amount, current interest rate, and loan terms.
How a Home Mortgage Calculator Works
To use it, you enter variables into the mortgage calculator, which estimates your monthly payments. An online mortgage calculator can also provide a breakdown of your payments and estimate closing costs. It can even factor in things like HOA fees. Typically, you need to have some details like:
- Price of the House - Enter estimated amounts for the price of the house you want to buy.
- Your Downpayment Amount - How much money can you afford to put down to buy the house?
- Loan Term (10, 15, or 30 years) - What loan term (number of years) do you wish to use for the loan? The longer the term, the lower the payments and vice versa.
- Interest Rate - What interest rate will you be able to lock in for the term?
- Homeowners Insurance Premium - The amount you will need to pay for homeowners insurance to protect your home. Mortgage companies require this.
- PMI Amount - Mortgage companies also require private mortgage insurance if you opt for an FHA loan and your down payment is less than 20 percent of the house value.
- Property Taxes - What will your annual property taxes cost?
Enter the details, and you will instantly see your estimated monthly payment. You can experiment with different amounts and home prices to determine how much you can afford or are willing to pay each month.
Key Benefits of Using a FREE Mortgage Calculator
Some of the benefits of using a mortgage calculator during your planning phase include:
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Control and Confidence
Knowing precisely what you will pay each month allows you to move forward confidently. The calculator gives you the ability to test different scenarios, fine-tune your budget and financial planning, and decide well. This sense of control and confidence is invaluable when buying a home.
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Save Time
Calling dozens of mortgage companies and researching online can waste valuable time. A free mortgage calculator gives you a complete picture of how much you can comfortably afford within seconds, saving you from the stress and hassle of extensive research.
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Informed Decision Making
The more you know, the better your decisions will be. Using PropertyChecker’s free mortgage calculator, you can compare different mortgage terms, insurance premiums, interest rates, and home purchase prices, to make a sound financial decision that fits your lifestyle and goals.
PropertyChecker’s free mortgage calculator can take the guesswork out of buying a home. Whether you're a first-time homebuyer or simply looking to refinance, this easy-to-use calculator gives you the information you need to make informed decisions. Find out exactly how much your monthly payments will be, explore different loan options, and discover the financial impact of various down payments, interest rates, and loan terms, all at the click of a button. Best of all, it’s completely free!
How to Calculate Mortgage Payments
A mortgage payment is made up of several different costs. It is not a single figure but a calculated total that factors in all your monthly housing expenses such as principal, interest, escrow, etc.
How to Calculate a Mortgage Payment
Learning how to calculate a monthly mortgage payment is a valuable skill. Once you understand all the components, you can apply it to different amounts to see how the figure changes. Once you take the price of the house and subtract your down payment, you have the loan amount. The simple way to calculate a mortgage payment is principal + interest + escrow amounts.
The key factors that play into calculating mortgage payments include:
- Home Price: The home price refers to the price of the house. Although the listing price may be one thing, you could negotiate it lower. Depending on your down payment, your loan amount will be determined. After you settle on a price and apply your downpayment, the remainder will be your loan amount (the amount you need to borrow to buy the house).
- Loan Term: Typically, you can choose your loan term, which is the number of years you want to repay the loan. Some standard loan terms are 10, 15, 20, or 30 years. Most homebuyers opt for a 30-year loan, which makes monthly payments more affordable.
- Principal: The principal is the total loan amount, which is the house price less your down payment. This amount is divided into a monthly amount based on the number of years of your loan term.
- Interest: When you take out a loan of any kind, you must pay it back with interest. The interest rate varies widely based on many factors like the economy, local real estate market, and other incentives. You will “lock in” at an interest rate your lender offers, and your payments will be based on it. You can choose a fixed rate, which stays the same for the life of the loan, or a variable rate, which changes with the national interest rate.
- Down Payment: When buying a house, most lenders require that you put down some money towards the price of the house. This down payment reduces the amount of your loan. Many homebuyers put down as little as 3% of the home price.
- Property Taxes: Each city/county in the U.S. determines the value of real estate in the jurisdiction and then sets property tax rates. This amount is a levy against the property which you must pay each year. It has nothing to do with your mortgage, except that lenders require you to escrow the taxes into the payment and pay it with your monthly amount. They do this to ensure you keep up with the property taxes. Then the lender pays the tax bill from your escrow account when it is due.
- Private Mortgage Insurance (PMI): If you choose a specific type of loan program or your downpayment is lower than the lender requires, you must purchase private mortgage insurance, which protects the bank if you default on the loan. The PMI covers the difference if local real estate values are low, and the bank cannot sell your house to recoup the mortgage amount.
- Homeowners Insurance: When you borrow money for a mortgage, your lender will require you to purchase homeowners insurance and keep it active on the property until you pay off the loan. This protects you and the bank if anything catastrophic damages or destroys the house.
- Closing Costs: Along with your downpayment, you must also have a lot of money to pay for closing costs. These are one-time fees, including the lender’s origination fee, recording fees, tax stamps, settlement and title services, and other local government fees. Closing costs generally run between two and five percent of the mortgage loan amount.
- Loan Program: The type of loan program you choose also factors into your costs. Some types offer you lower interest rates and better closing fees. Your options are conventional, VA, FHA, USDA, etc.
- Credit Score/Payment History: Your credit score and payment history factor into your mortgage payment quite a bit. Lenders will want to work with you if you have a strong credit score and a blemish-free history of paying all your bills on time. They may offer you better rates and terms. If you have a lower credit score or some missed payments (even years ago), it will be harder for you to get approved for a mortgage and you may have to pay more for interest.
General Step-by-Step Process for Calculating Mortgage Payment
Mortgage payments can seem mysterious until you break it down and understand the formula and the pieces that factor in. A typical mortgage payment formula looks like this:
Insurance
Payment
| Component | Description |
|---|---|
| Principal | The total amount you borrowed to buy the house. |
| Interest | The cost of the loan based on current interest rates and your lender. |
| Mortgage Insurance (if necessary) |
The required insurance to protect your lender if the equity in the house is less than 20%. |
| Escrow | The total extra expenses, which may include property taxes, homeowners insurance, and HOA dues. |
| Payments | The total number of payments you will be making over the life of the loan. Multiple the loan term (in years) by 12. For example, a 30-year loan term would be 360 payments (30 years x 12 months = 360 total payments). |
Although you can do the math yourself, a free mortgage loan calculator can simplify the process. You can also try various scenarios using specific amounts to fine-tune your finances. Combine it with a mortgage payoff calculator to show an amortization schedule with each payment and how much you owe at particular points in time. Lenders may also have a mortgage rate calculator on their website so you can quickly check rates and plug those into our mortgage calculator to get an accurate view of your situation.
Below is an example for calculating mortgage payments.
| Detail | Value |
|---|---|
| Home Price | $350,000 |
| Down Payment | $52,500 (15%) |
| Loan Amount | $297,500 |
| Interest Rate | 3.75% (fixed) |
| Loan Term | 30 Years (360 months) |
| Property Taxes | $4,500/year ($375/month) |
| Homeowners Insurance | $1,500/year ($125/month) |
| Private Mortgage Insurance | $80/month |
Step-by-Step Monthly Payment Calculation
- Loan Amount ($297,500) divided by 360 months = $826.38/month.
- Interest at a rate of 3.75% equals $551.39/month.
- Total Principal + Interest = $1377.77
- Add the monthly amounts (principal, interest, taxes, homeowners insurance, and PMI) together. $1377.77 + $375 + $125 + $80 = $1,957.77
Your total monthly payment with everything added in is $1,957.77.
Final Mortgage Calculator Figures
| Component | Monthly Cost |
|---|---|
| Principle & Interest | $1377.77 |
| Property Taxes | $375 |
| Homeowners Insurance | $125 |
| PMI (if applicable) | $80 |
| Total Monthly Payment | $1957.77 |
Types of Mortgage Loans in USA
When shopping for mortgage financing, you might wonder, “What type of mortgage loans are there?” Rest assured, you have options. You can choose the lender and various loan types. The type of mortgage loan determines the rate, term, and other factors.
The main types of mortgage loans available in the USA consist of:
- Conventional: Conventional mortgages fit best for borrowers with good credit and have standard rates and terms.
- Fixed-Rate Mortgages: A fixed-rate mortgage means the interest rate stays the same throughout the life of the loan. It provides steady payments with no increase or change regardless of how the federal interest rate rises or lowers.
- Adjustable-Rate Mortgages (ARMs): An adjustable-rate mortgage changes as the federal rate changes.
- FHA Loans: FHA loans are backed by the government and work best for those with poor credit or very little cash to use as a down payment. FHA loans are insured by the Federal Housing Administration (FHA). Borrowers with a credit score as low as 580 and a 3.5 percent down payment can use FHA loans.
- VA Loans: VA loans are specifically designed to help veterans get affordable financing with fair terms and low rates. VA loans are backed by the U.S. Department of Veterans Affairs (VA). There is no minimum down payment, credit score or mortgage insurance requirement.
- USDA Loans: USDA loans are guaranteed by the U.S. Department of Agriculture (USDA) and they help low-income and moderate-income families buy homes in rural areas, especially farm land. You do not need a minimum credit score or down payment to apply. You will, however, have to pay extra fees at closing.
- Jumbo Loans: If you are buying a very expensive home, you may need a jumbo loan and the bank will require plenty of collateral and good credit to back it up.
- Construction Loans: When building a house, you can get a construction loan with no final “loan amount” until construction is complete. The loan will remain open with a cap because construction tends to go up or down based on finishing selections and the cost of materials. Once construction is complete, the loan will convert to a conventional loan with a firm loan amount and monthly payments.
A few specialty loans exist, such as an interest-only loan where you only pay interest for a time, then start paying principal and interest. Another is a piggyback loan, which is actually two loans. A balloon mortgage is where you pay low payments first, then owe the remainder in a final lump sum.
Remember, your circumstances will determine the best type of mortgage loan for you.
Types of Mortgage Lenders
Along with the loan type, you also have a choice between types of lenders. Each type has its own benefits and drawbacks. The most common types of mortgage lenders you will find include:
| Lender Type | Description |
|---|---|
| Commercial Banks | Most commercial banks grant home loans to homebuyers. These banks charge an interest rate that is usually close to the national rate and offer standard terms. If you have a relationship with one of these banks, you can get better service and deal with a local representative. These banks will have their own underwriting department, which has the final say about approving your loan or not. However, commercial banks are going to have strict requirements and less flexibility when it comes to unusual circumstances. |
| Credit Unions | Credit unions are retail lenders that provide loans directly to consumers. You can work with your local credit union, and if you have an account with them, you might receive special terms. However, they may have limited options for mortgages and strict requirements. |
| Mortgage Brokers | Mortgage brokers are considered wholesale lenders. This means that you become their client and they farm out your information to many banks to find you the best deal. These types rarely have direct contact with borrowers and you will pay a higher fee to use them, but you might get better rates or terms by comparing loan options. |
| Online Lenders | Online lenders are a newer option that allows you to apply, provide information, and receive approval all online. Like wholesale vendors, these platforms collect your information and then find the best mortgage option for you based on your credit rating, loan amount needed, and cash on hand. You may not get any personal service with these options and support may be difficult to obtain. |
| Savings and Loan Associations | S&L banks are not as popular as they once were, but still an option for mortgages. They are shareholder/customer owned organizations that offer more affordable mortgages. These banks may be limited in what they can offer due to their small size, but they may also offer lower interest rates. |
Compare Mortgage Rates by States
Mortgage rates vary widely based on location, economic factors, and the bank’s resources. Inflation also factors in along with the Federal Reserve's monetary policy. The government takes action to try and control interest rates, so they don’t fall too low or rise too high. The difference between one state or another can be a fraction of a percent or larger, but every bit matters when paying interest. See the chart below to compare how rates stack up in each state.
| State | Average 30-Year Fixed Rate |
|---|---|
| Alabama | 3.18% |
| Alaska | 3.16% |
| Arizona | 3.21% |
| Arkansas | 3.16% |
| California | 3.11% |
| Colorado | 3.14% |
| Connecticut | 3.17% |
| Delaware | 3.15% |
| District of Columbia | 3.12% |
| Florida | 3.21% |
| Georgia | 3.18% |
| Hawaii | 3.05% |
| Idaho | 3.15% |
| Illinois | 3.18% |
| Indiana | 3.25% |
| Iowa | 3.02% |
| Kansas | 3.15% |
| Kentucky | 3.19% |
| Louisiana | 3.18% |
| Maine | 3.17% |
| Maryland | 3.12% |
| Massachusetts | 3.15% |
| Michigan | 3.22% |
| Minnesota | 3.12% |
| Mississippi | 3.20% |
| Missouri | 3.18% |
| State | Average 30-Year Fixed Rate |
|---|---|
| Montana | 3.15% |
| Nebraska | 3.11% |
| Nevada | 3.21% |
| New Hampshire | 3.18% |
| New Jersey | 3.11% |
| New Mexico | 3.23% |
| New York | 3.19% |
| North Carolina | 3.16% |
| North Dakota | 3.00% |
| Ohio | 3.23% |
| Oklahoma | 3.21% |
| Oregon | 3.18% |
| Pennsylvania | 3.14% |
| Rhode Island | 3.20% |
| South Carolina | 3.17% |
| South Dakota | 2.96% |
| Tennessee | 3.19% |
| Texas | 3.18% |
| Utah | 3.13% |
| Vermont | 3.15% |
| Virginia | 3.10% |
| Washington | 3.16% |
| West Virginia | 3.21% |
| Wisconsin | 3.16% |
| Wyoming | 3.09% |
You don’t have to search for a specific mortgage calculator for Texas, mortgage calculator for California, mortgage calculator for Florida, or a mortgage calculator for Ohio. PropertyChecker’s FREE mortgage calculator works seamlessly in every state.
Mortgage Options and Key Terms
Mortgages can be complicated and some of the terms may seem confusing. Use the glossary below to understand better each term’s meaning and how they work.
- Amount Financed: The price of the house less your downpayment and any fees you pay upfront.
- Annual Percentage Rate: An annual percentage rate (APR) is typically higher than your interest rate because it factors in points, broker fees, and other charges.
- Closing Disclosure: The closing disclosure is a document that includes all the fine details about your loan, including your interest rate, the amount financed, and all the fees you will pay.
- Conforming Loans vs. Non-Conforming Loans: Conforming loans have standard features defined by Fannie Mae and Freddie Mac, while non-conforming loans do not abide by these standards.
- Debt-Ratio: Your debt-to-income ratio is a percentage derived from the income you earn compared to your debts. Banks require a specific debt-to-income ratio before allowing you to borrow money.
- Equity: Equity is the value of your home minus your current mortgage balance, and any other home loans using the house as collateral.
- Escrow: Escrow is an account held by your mortgage company. You pay for taxes and insurance with your mortgage payment, and the company pays these bills for you when they become due.
- Fixed Rate vs. Adjustable Rate: A fixed-rate loan has an interest rate that stays the same for the life of the loan. An adjustable-rate loan has an interest rate that goes up or down based on the federal rate.
- HOA Dues: If you buy a condo, you must pay homeowners association dues, which cover shared services like lawn care, snowplowing, and maintenance.
- Loan Term: Loan term is the number of years/months you agree to repay the loan. A typical mortgage is for 30 years (360 months).
- Pre-Payment Penalty: Some rare home loans charge you a fee if you pay off the loan before the term ends.
- Rate Lock: Typically, you can lock in an interest rate for a short period before closing on the property. The key is to lock in before rates go up.
- Title Insurance: Most lenders require you to purchase title insurance to protect you and your lender in case of title disputes after closing.
Use the resources below to understand additional mortgage terms and related concepts better.
Frequently Asked Questions
What is a down payment?
A down payment is the amount of cash you plan to put down on the house to reduce the amount of your loan.
What is mortgage insurance?
Mortgage insurance protects the lender if you default on the loan and they need to sell the house, but it is not worth as much as the mortgage.
How does a reverse mortgage work?
A reverse mortgage is when someone uses the equity in their house and takes out a mortgage using the house as collateral. The homeowner receives the equity amount in cash and doesn’t make any payments on the house until they die or sell it. When that occurs, the lender or family sells the house, and the loan is paid off plus interest.
How to calculate mortgage insurance?
Multiply your mortgage loan amount by the current PMI rate and then divide that by 12. That will give you your monthly mortgage insurance rate.
What is the mortgage payment formula?
The mortgage payment formula is:
M = P(I(1 + I)^n) / ((1 + I)^n - 1). The
variables are as follows:
M: The monthly mortgage payment
P: The principal amount, or loan balance
I: The interest rate
n: The total number of months you'll be paying off your loan
How much is private mortgage insurance?
Generally, PMI costs roughly 0.5 - 1.5% of your original loan amount. You must pay it until the equity in your house is 20% or higher.
How to lower your monthly mortgage payment?
You can refinance with a lower interest rate or find cheaper homeowners insurance. Once your home’s equity reaches 20%, ask your lender to remove the PMI.
Which formula should be used to correctly calculate the monthly mortgage payment?
The correct formula to use to calculate your monthly mortgage payment is the one detailed above: M = P(I(1 + I)^n) / ((1 + I)^n - 1).