How to Use This Mortgage Calculator
Buying a home is one of the biggest financial decisions you'll ever make. Knowing your true monthly cost—beyond just the sticker price—is crucial. Here is how to use our tool:
- Home Price: The total purchase price of the property.
- Down Payment: The cash you pay upfront. A higher down payment lowers your monthly interest costs.
- Interest Rate: The annual percentage rate (APR) estimated for your loan. Check current 2025 rates for accuracy.
- Loan Term: The duration of the loan. 30 years is standard, but 15 years saves significant interest.
💡 Pro Tip: The Impact of Extra Costs
Many first-time buyers forget about Property Taxes and Home Insurance. These are often bundled into your monthly payment via an escrow account. Our calculator includes these by default (1.2% tax and $1500 insurance) but be sure to adjust them for your local area.
How Is Your Mortgage Calculated?
The core formula for a fixed-rate mortgage is:
Where:
- M = Total monthly payment
- P = Principal loan amount (Home Price - Down Payment)
- i = Monthly interest rate (Annual Rate / 12)
- n = Number of payments (Years × 12)
Frequently Asked Questions (FAQ)
What is included in a mortgage payment?
A standard mortgage payment, often called PITI, typically includes:
- Principal: The money that pays down your loan balance.
- Interest: The cost of borrowing money.
- Taxes: Property taxes collected by your local government.
- Insurance: Homeowners insurance to protect against damage.
Should I choose a 15-year or 30-year term?
A 30-year mortgage has lower monthly payments but costs much more in interest over time. A 15-year mortgage has higher payments but builds equity faster and saves tens of thousands in interest.
What if I have HOA fees?
If you buy a condo or a home in a managed community, you likely pay Homeowners Association (HOA) fees. These are usually paid directly to the HOA, not your lender, but lenders factor them into your debt-to-income ratio. Use the "Optional Costs" section above to include them.
2025 Mortgage Trends
As of late 2025, interest rates have stabilized from their previous highs. However, property taxes in many US states have increased due to rising home values. It is more important than ever to budget for the total cost of housing, not just the loan payment.