Mortgage calculator

How a mortgage payment is calculated

A fixed-rate mortgage is paid off in equal monthly installments. Early on, most of each installment is interest, because interest is charged on a large balance. Each month a little more goes to principal, until the last payment clears the loan. Lenders get the installment from the standard amortization formula:

M = P × r × (1 + r)ⁿ ÷ ((1 + r)ⁿ − 1)

P is the amount you borrow, r is the yearly rate divided by 12, and n is the number of monthly payments. Here is the calculator's opening example, worked by hand:

1. 1

   Find the loan amount

   A $400,000 home with 10% down: $400,000 − $40,000 = $360,000.

2. 2

   Turn the rate and term into months

   7.24% ÷ 12 = 0.6033% a month, or r = 0.0060333. Thirty years is n = 360 payments.

3. 3

   Apply the formula

   (1.0060333)³⁶⁰ = 8.7187. So M = $360,000 × 0.0060333 × 8.7187 ÷ 7.7187 = $2,453.39 for principal and interest.

4. 4

   Add the escrow items

   Property tax at the U.S. average of 0.89%: $400,000 × 0.0089 ÷ 12 = $296.67. Insurance: $2,400 ÷ 12 = $200. PMI at 0.50% of the loan: $360,000 × 0.005 ÷ 12 = $150. Total: $3,100.06 a month.

5. 5

   See the cost over time

   360 payments of $2,453.39 add up to $883,222. Take away the $360,000 you borrowed and $523,222 is interest. In year 1 you pay $25,950 of interest and only $3,491 of principal.

Monthly payment per $100,000 borrowed

Principal and interest only. Multiply by your loan in hundreds of thousands: a $360,000 loan at 7.24% is 3.6 × $681.50 = $2,453.

Every quarter point of rate on a $360,000, 30-year loan moves the payment by roughly $60 a month and the lifetime interest by more than $20,000. That is why it pays to get Loan Estimates from at least three lenders on the same day.

Property tax, insurance and escrow

Most lenders collect property tax and homeowners insurance with your payment and hold the money in an escrow account, then pay the bills when they come due. These two lines often surprise first-time buyers more than the interest rate does. The state presets use the Tax Foundation's effective rates for owner-occupied homes, which are total taxes paid divided by total home value. They run from 0.29% in Hawaii to 1.88% in New Jersey and Illinois. Your county, school district and any homestead exemption can push your bill well above or below your state's figure, so check the listing's tax history or the county assessor.

Two things change after you buy. Many places reassess a home when it sells, so the seller's old bill can understate yours. And insurance premiums have climbed fast in storm and wildfire regions. Get a real insurance quote before you make an offer, and expect your escrow payment to be adjusted once a year.

PMI: what it costs and when it ends

On a conventional loan with less than 20% down, the lender requires private mortgage insurance. It protects the lender, not you. The price depends mostly on your credit score and down payment; it is often quoted somewhere around 0.3% to 1.5% of the loan a year, so the 0.50% default is only a placeholder. Ask your lender for the exact figure.

The Homeowners Protection Act sets the exit rules for most loans on a primary home closed since July 29, 1999:

• 80%: you can ask. Once your balance reaches 80% of the original value (the lower of the price or the appraisal), you can request cancellation in writing. You need a good payment history, no second loan, and the lender may want proof the home hasn't lost value.
• 78%: it ends automatically. When the balance is scheduled to hit 78% of the original value, the servicer must drop PMI if you're current. This calculator uses that date.
• Halfway point: final stop. PMI must end by the middle of the loan term even if 78% hasn't been reached.

In the example, the balance is scheduled to reach 78% of $400,000 ($312,000) after 118 payments, so PMI costs about $17,700 in total. FHA loans charge their own mortgage insurance premium, which for most loans with less than 10% down lasts for the life of the loan. VA loans have no monthly mortgage insurance.

Extra payments and the 15-year option

Any amount you add goes straight to principal, and interest is figured on what's left. With $200 more a month, the example loan is paid off in 23 years and 8 months instead of 30, and you skip about $130,278 of interest. A 15-year loan goes further: the rate is lower (6.60% vs. 7.24% in the latest survey) and the payoff comes twice as fast, so total interest drops from $523,222 to $208,046. The trade-off is a payment about $702 higher, which also raises your debt-to-income ratio when you apply.

A 30-year loan with voluntary extra payments keeps the lower required payment as a safety net. A 15-year loan forces the discipline and gets the better rate. If you go the extra-payment route, tell your servicer the money is for principal, and check the next statement.

Mistakes to avoid

• Budgeting on principal and interest alone. Tax, insurance and PMI added $646.67 a month to the example, a 26% jump.
• Using the seller's tax bill. A reassessment after sale or a lost homestead exemption can raise it sharply.
• Forgetting the cash to close. Closing costs and prepaid escrow come on top of the down payment. Our closing cost calculator estimates them.
• Comparing rates without the fees. A lower rate bought with points costs cash up front. Compare the APR and Section A of each Loan Estimate.
• Draining savings for a bigger down payment. Reaching 20% kills PMI, but a home with no cash cushion is risky. Keep several months of expenses.

Sources and assumptions

• Default rates: Freddie Mac, Primary Mortgage Market Survey, week of October 29, 2026: 30-year fixed 7.24%, 15-year fixed 6.60%. These are national averages for borrowers with strong credit and 20% down, and do not include fees or points.
• Payment formula: standard fixed-rate amortization, monthly compounding, rounded to the cent. The final payment is trimmed to the remaining balance.
• Property tax by state: Tax Foundation, Property Taxes by State and County, 2026 (published March 16, 2026), mean effective rates on owner-occupied housing from the Census Bureau's 2024 American Community Survey. U.S. average of 0.89% from NAHB's analysis of the same survey, Property Taxes by State, 2024 ($8.88 per $1,000 of value). Tax is applied to the purchase price.
• Insurance: the $2,400 a year default is our estimate. It sits between the last official average, $1,569 for an HO-3 policy in 2022 (NAIC, via the Insurance Information Institute), and 2026 national averages from insurance sites, which run from about $2,490 a year for $400,000 of dwelling coverage (NerdWallet, 2026) to Insurify's projection of $3,057 (Claims Journal, March 18, 2026). Use a real quote.
• PMI rules: Consumer Financial Protection Bureau, When can I remove PMI from my loan? (reviewed August 28, 2026), summarizing the Homeowners Protection Act. The calculator charges PMI only when the down payment is under 20% and stops it at the scheduled 78% date or the loan's midpoint, whichever comes first. The 0.50% rate is our estimate, within Freddie Mac's range of $30 to $150 a month per $100,000 borrowed, or about 0.36% to 1.8% of the loan a year (The Math Behind Putting Down Less Than 20%, last reviewed June 6, 2025). Your rate depends on your credit score and down payment.
• Not included: closing costs, points, adjustable-rate changes, escrow cushions, rising tax or insurance bills, and the tax deduction for mortgage interest.
• This calculator is an educational estimate. It is not an offer of credit, a rate lock or financial advice. Speak with a licensed lender or a HUD-approved housing counselor. Rates checked October 29, 2026.

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