How the mortgage calculator works
Your loan amount is the home price minus your down payment. The calculator splits your monthly payment into two parts: principal & interest (P&I), found with the standard mortgage amortization formula, and escrow — your estimated property tax and home insurance spread across 12 months. It also totals the interest you'll pay over the life of the loan.
The formula behind the monthly payment
Principal and interest use the amortization formula lenders rely on worldwide:
M = P × [ r(1+r)n ] ÷ [ (1+r)n − 1 ]
Here P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the number of monthly payments (years × 12). Property tax (a yearly % of the home price) and annual insurance are then divided by 12 and added on top.
Worked example
Buy a $350,000 home with $70,000 down (20%) at 6.5% over 30 years, with 1.1% property tax and $1,500/year insurance:
- Loan amount: $350,000 − $70,000 = $280,000
- Principal & interest: ≈ $1,770 / month
- Tax + insurance (escrow): ≈ $446 / month
- Total monthly payment: ≈ $2,216
- Total interest over 30 years: ≈ $357,000
15-year vs 30-year: the real trade-off
On a $300,000 loan at 6%, a 30-year term costs about $1,799/month and roughly $347,500 in total interest. The same loan over 15 years costs more each month ($2,532) but only about $155,700 in interest — a saving of nearly $192,000. Term length is the single biggest lever on lifetime cost.
Key terms
Principal — the amount you borrow. Escrow — money collected with your payment to cover tax and insurance. PMI — private mortgage insurance, often required when the down payment is under 20%. Amortization — the schedule that gradually shifts each payment from mostly interest to mostly principal. APR — the rate including certain lender fees, usually a little higher than the quoted rate.
Common mistakes to avoid
Budgeting for principal and interest only, then being surprised by tax and insurance. Forgetting PMI, HOA dues, and closing costs. Chasing the lowest monthly payment with a long term while ignoring the much larger total interest. Comparing lenders on the quoted rate instead of the APR.
Frequently asked questions
Does this include property tax and insurance?
Yes. Enter your annual property tax rate and yearly insurance, and both are divided by 12 and included in the monthly figure.
What about PMI or HOA fees?
They aren't separated here. For a rough estimate, fold their monthly cost into the insurance field.
How much should my down payment be?
A 20% down payment avoids PMI in many markets and lowers your loan, but smaller down payments are common. Use the calculator to compare payments at different down payment levels.
Why is so much of my early payment interest?
Interest is charged on the outstanding balance, which is largest at the start. Open the amortization schedule above to watch the balance — and the interest portion — shrink over time.
Should I pick a 15- or 30-year mortgage?
A 15-year term saves a large amount of interest but raises the monthly payment. A 30-year term is easier on monthly cash flow. The example above shows the difference.
Can I pay my mortgage off early?
Usually yes. Extra payments go straight to principal and can save years of interest. Check your loan for any prepayment penalty.
Is the interest rate the same as APR?
No. APR includes some lender fees, so it's typically a bit higher than the quoted rate. Compare lenders on APR.
Is my data saved?
No. Everything runs in your browser; nothing is uploaded.