How does the mortgage calculator work?
The calculator builds your payment from the loan amount, rate and term, then adds the costs a basic principal-and-interest figure leaves out — PMI, property tax, insurance and HOA — and runs the full schedule month by month to find your total interest and payoff date.
Enter price & down payment
The difference is your loan amount, and the ratio decides whether you pay PMI.
Add the real costs
Property tax, insurance, HOA and your PMI rate, so the monthly figure is the one you will actually pay.
See the whole loan
Total monthly payment, total interest, when PMI stops, and what an extra payment saves.
The number most calculators leave out
Type a price and a rate into most mortgage calculators and you get a principal-and-interest figure. That number is real, but it is not what leaves your account each month. Property taxes and homeowners insurance are usually escrowed and collected with the payment, and below 20% down you also pay private mortgage insurance. Together these routinely add 25% to 40% on top of principal and interest — enough to turn an affordable-looking loan into one that does not fit the budget.
This calculator asks for all of them, and it treats PMI as the temporary cost it actually is: charged while your balance sits above 80% of the original price, then dropped, with the payment falling accordingly.
L is the loan amount, r the monthly rate (annual ÷ 12), n the number of monthly payments. Total payment adds tax ÷ 12, insurance ÷ 12, HOA, and PMI while the balance stays above 80% of the purchase price.
The formula, one piece at a time
That expression looks forbidding, but it is only doing one job: finding the single payment amount that, repeated every month for the whole term, exactly clears the debt and the interest at the same moment. Too small and you would still owe money at the end; too large and the loan would be repaid early. There is only one number that lands exactly, and the formula finds it.
It has three inputs, and only three:
| Symbol | What it means | In our example |
|---|---|---|
| L | The loan amount — price minus down payment, not the price | $378,000 |
| r | The monthly rate: the annual rate ÷ 100 ÷ 12 | 6.5 ÷ 100 ÷ 12 = 0.00541667 |
| n | The number of monthly payments: years × 12 | 30 × 12 = 360 |
The two conversions catch people out. Your 6.5% is an annual rate, but you pay monthly, so it has to be divided by 12 before it means anything in this formula. And the term has to be counted in payments, not years, for the same reason.
Substituting the numbers, step by step
Here is the whole calculation for a $378,000 loan at 6.5% over 30 years, with nothing skipped:
- Find the monthly rate. 6.5 ÷ 100 ÷ 12 = 0.00541667. This is the fraction of the balance charged as interest each month.
- Find one month's interest on the full loan. L × r = $378,000 × 0.00541667 = $2,047.50. If you only ever paid this, the balance would never move — it is the interest-only payment.
- Raise (1 + r) to the power of −n. (1.00541667)−360 = 0.143025. This says that $1 arriving 360 months from now is worth about 14 cents today, at this rate.
- Subtract that from 1. 1 − 0.143025 = 0.856975. This is the denominator, and it is the step that turns an interest-only payment into one that also retires the principal.
- Divide. $2,047.50 ÷ 0.856975 = $2,389.22 a month.
Notice what step 5 really did. The interest-only payment was $2,047.50; dividing by a number slightly below 1 pushed it up to $2,389.22. That difference — about $342 — is the part of the very first payment that actually reduces what you owe. Everything above the interest goes to principal, and that is the whole mechanism.
What actually happens each month
The payment never changes, but what it buys changes completely. Each month the lender charges interest on whatever you still owe — balance × r — and whatever is left of your payment comes off the principal. Because the balance falls a little each month, the interest charge falls too, so more of the next payment goes to principal. The effect compounds slowly at first, then accelerates:
| Payment | Goes to interest | Goes to principal | Balance after |
|---|---|---|---|
| 1 | $2,047.50 | $341.72 | $377,658 |
| 60 (year 5) | $1,919.23 | $469.99 | $353,849 |
| 120 (year 10) | $1,739.31 | $649.91 | $320,454 |
| 180 (year 15) | $1,490.52 | $898.70 | $274,274 |
| 240 (year 20) | $1,146.48 | $1,242.74 | $210,415 |
| 300 (year 25) | $670.74 | $1,718.48 | $122,110 |
| 360 (final) | $12.87 | $2,376.35 | $0 |
The first payment puts 86% toward interest and 14% toward the balance. It takes until roughly payment 230 — nineteen years in — for the split to pass halfway. That is why total interest on this loan reaches $482,118, more than the amount borrowed, and why paying anything extra in the early years is so effective: an extra dollar paid in month 12 removes 348 months of future interest on that dollar, while the same dollar in month 300 removes only 60.
Where PMI, tax and insurance fit
None of them are in the formula above. The formula produces principal and interest only — the part that goes to the lender to repay the loan. Everything else is added on top of that figure:
- Property tax and insurance are annual bills divided by 12 and collected into escrow alongside the payment. They drift over time as assessments and premiums change.
- HOA dues are paid directly to the association, not the lender, but they are part of what the home costs you monthly.
- PMI is loan amount × PMI rate ÷ 12, and it is the only one that ends. Once the balance falls to 80% of the original price, it comes off and the payment drops.
Worked example: 10% down, with PMI
$420,000 home, $42,000 down, 30 years at 6.5%, $4,600 tax, $1,800 insurance, 0.5% PMI
A buyer puts 10% down, leaving a $378,000 loan and a starting position below 20% equity, so PMI applies.
- Principal & interest: $378,000 over 360 months at 6.5% works out to about $2,389 a month.
- Escrow: $4,600 tax ÷ 12 = $383, plus $1,800 insurance ÷ 12 = $150, so $533 a month.
- PMI: $378,000 × 0.5% ÷ 12 = about $158 a month, until the balance reaches $336,000.
- Total monthly payment: roughly $3,080 while PMI applies, dropping to about $2,923 once it comes off — around 7 years 11 months in, after about $14,960 of PMI.
Result: principal and interest alone understate the real payment by nearly $700 a month.
Worked example: what $200 a month extra does
The same $378,000 loan at 6.5%, with $200 a month extra toward principal
Extra payments go entirely to principal, so they remove not just the dollar paid but every future month of interest that dollar would have accrued.
- Scheduled payoff: 30 years, with roughly $482,000 of interest over the term.
- With $200 extra: the balance clears in 24 years 2 months — 5 years 10 months early.
- Interest saved: about $110,000, from roughly $58,000 of extra payments made along the way.
Result: nearly $2 of interest avoided for every $1 paid early. The effect depends heavily on your rate and how soon you start — enter your own figures above.
Understanding each result
Total monthly payment is principal, interest, escrowed tax and insurance, HOA and PMI combined — the figure to test against your budget.
Principal & interest is the portion that goes to the lender and stays fixed for the life of a fixed-rate loan. Escrowed amounts, by contrast, drift as taxes and premiums are reassessed.
Total interest paid covers the full term at the payment you entered, including any extra principal. Paid off in reflects that same schedule, which is shorter than the nominal term whenever you pay extra.
PMI per month shows as $0 once your down payment reaches 20%. Where it applies, the summary beneath the results gives the month it stops and the total you will have paid.
What this calculator doesn't model
It assumes a fixed rate for the whole term, so adjustable-rate loans are outside its scope after the initial period. It does not model closing costs, mortgage points, FHA or VA insurance structures, tax deductibility of mortgage interest, PMI cancellation based on a new appraisal after your home appreciates, or escrow shortfalls when a tax bill rises mid-year. It is an estimate for planning and comparison, not a loan offer or financial advice — your lender's disclosure is the authoritative figure.
Common ways to use this calculator
Check the full payment against your budget before you make an offer, not just principal and interest.
See exactly what avoiding PMI is worth in monthly cost and total dollars.
Weigh a higher payment against a much lower lifetime interest cost.
Find out how much a spare $100 or $200 a month takes off the term.
Privacy and appropriate use
Your inputs are processed directly in your browser and are not sent to a database. This is a planning-stage estimate, not a loan offer, a rate quote, or financial advice — confirm figures with a lender before making a purchase decision.