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Mortgage Calculator: PMI, Interest, and Taxes

Updated Nov. 25, 2022
Christy Bieber
By: Christy Bieber

Our Mortgages Expert

Many or all of the products here are from our partners that compensate us. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation. Terms may apply to offers listed on this page.
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How to use this mortgage calculator

The Ascent's mortgage calculator helps you understand how much a home loan will cost. It also makes it easy to compare loan options. To use the calculator, plug in:

You can also put in the cost of home insurance, property taxes, and homeowners association (HOA) fees, if you know them. This will provide a more accurate estimate.

Mortgage calculator formulas

A good mortgage calculator takes into account all the monthly costs that go into a mortgage payment. These costs are added together to estimate your total monthly payments as well as the interest cost you'll pay over time.

Here's how a mortgage calculator determines your payment amount:

  • The calculator determines how much you're borrowing. This is the total home price, minus any down payment. Put into the calculator the cost for homes you are interested in, as well as how much cash you'll put down. If you are buying a $300,000 home and making a $30,000 down payment, the calculator subtracts $30,000 from $300,000 to determine that you are borrowing $270,000.
  • It calculates your principal and interest payments. These are based on the loan amount, the interest rate, and the loan type. A loan with a longer term typically has a higher interest rate, but the principal payment isn't as high each month as with the payment for a shorter-term loan, since you have longer to pay off the principal. For example, if you borrowed $270,000 and took out a 30-year loan at 3.9%, your principal and interest payment would be $1,274. If you borrowed the same amount through a 15-year loan at 3.2%, your principal and interest payment would be $1,891.
  • The calculator adds in property taxes, home insurance, HOA fees, and any mortgage insurance costs. The mortgage calculator can estimate these inputs based on the typical costs for a home in your price range, or you can provide exact details to get a more accurate estimate. If your home insurance is $1,200 per year, your property taxes are $3,000 annually, and your HOA fees are $500 per year, this adds around $392 to your monthly payment. If you've made less than a 20% down payment, mortgage insurance must be included. If mortgage insurance premiums cost 1% of your loan amount annually, they would add an additional $225 to your monthly payments (based on 1% of a $270,000 loan, divided by 12).

The added-together principal, interest, property taxes, HOA costs, home insurance fees, and mortgage insurance reveal your total monthly payment. If you opted for the 30-year loan mentioned above, this would mean adding up:

  • $1,274 for principal and interest
  • $329 for property taxes, insurance, and HOA costs
  • $225 for mortgage interest

The calculator would show your total monthly mortgage payment at $1,829.

Elements of a mortgage calculator

It's important to understand all the inputs the calculator uses to determine your monthly and total costs.

Home price

This is the amount you are paying for the home. If you've made an offer to buy a house for $300,000, the home price would be $300,000.

Down payment

The down payment is the amount of money you put down on the property at closing. Ideally, this will be at least 20% of the home's purchase price because you can qualify for a more affordable loan and get a broader choice of lenders if you put 20% down. Lenders do let you put down much less in some cases -- as low as 3%, or even $0 with certain loans (such as VA loans).

Consider the amount of cash available to you to determine your down payment. If you have $30,000 available for this use, you'd be putting 10% down on your $300,000 loan.

The down payment is subtracted from the home's purchase price to determine the amount of money you borrow from your mortgage lender.

Interest

Interest is the rate you pay to borrow. Your interest rate is based on national averages and economic conditions, as well as individual financial credentials such as your credit score and your debt relative to your income. Your loan type and choice of lender also factor into your interest rate.

The higher the interest rate, the more financing charges you pay your lender over time. A higher rate also leads to larger monthly payments.

Mortgage type

There are several kinds of mortgages, including 30-year, 20-year, and 15-year loans. Your loan type affects monthly payments and total costs.

A loan with a longer payoff time typically has a higher interest rate. Since you pay more in financing charges and pay interest for longer, it's more expensive than a loan with a shorter payoff period. However, the monthly payments are lower. Because you aren't making as many payments, loans with shorter payoff times have higher monthly payments -- despite the lower rate and lower total costs.

Insurance

Homeowners insurance is required by lenders. Lenders require this because the home serves as collateral for the loan. The cost to insure a property is based on many factors, including its value, the type of insurance, and the level of risk. For example, homes in an area prone to earthquakes typically cost more to insure.

It's a good idea to compare insurance quotes from several carriers to find the most affordable coverage.

Lenders typically collect monthly payments (as part of your overall mortgage payment) for home insurance and keep the money in an escrow account. For example, if your insurance is $1,200 per year, your insurer adds $100 onto your mortgage payment. The money is kept in a special account, then your insurance bill is sent to your lender, who pays it out of that account annually.

Property tax

Property tax is paid to local and state governments. The amount of property tax depends where you live. It's usually expressed as a percentage of your home's value. Property tax payments are also collected by your lender as part of your monthly mortgage payments and put into escrow until your lender pays your property tax bill once per year.

HOA fees

If your home is part of an association, then HOA fees are factored into monthly housing costs as well. Associations collect dues to maintain common areas and provide other services.

Why would someone need a mortgage calculator?

Our mortgage calculator can help you make informed decisions about your loan, including:

  • Comparing loan scenarios: Before applying with a mortgage lender, see how decisions such as borrowing more or making a smaller down payment affect your cost. Compare scenarios by changing the input amounts.
  • Comparing loan types: Change the loan term to see how a shorter or longer payoff time affects loan costs.
  • Determining what you can afford: Use the calculator to see the cost of different loan amounts to see if they fit in your budget.

If you get quotes from several mortgage or refinance lenders, you can also use the calculator to see how much each loan costs.

How to interpret the results of the mortgage calculator

The results of the mortgage calculator can help you determine how much a particular loan will cost each month. Using the calculator, you can compare loan types and determine, for instance, if you prefer a 15-year or 30-year loan, based on total costs and monthly payments.

You can also make sure the mortgage payments fit into your budget. If your total payment would be $1,829 with all costs added in, you can assess whether this is a comfortable amount to pay.

What to do after using the mortgage calculator

After using the mortgage calculator, you're ready to make informed choices about home-buying. Consider taking these next steps.

Get qualified for a loan

Work on improving your financial credentials to increase the odds you can qualify for a mortgage loan at a competitive rate. This could mean paying down debt or improving your credit score.

Choose a loan type

You can use the mortgage calculator to decide if you want a 30-, 20-, or 15-year loan based on the monthly payments and total loan costs for each loan type.

Compare rate quotes

Apply with several lenders to get preliminary rate quotes. You can input the interest rates and terms each lender offers into the calculator to see which lender offers the best loan.

Obtain pre-approval

After narrowing your options to one lender, submit your financial information to complete the pre-approval process. Lenders will assess your details and tell you how much you can borrow, at what rate. You lock in your loan rate during this process.

While you aren't 100% guaranteed to get the loan you're pre-approved for, you should get final approval under the agreed-upon terms as long as nothing changes financially, and the home you're buying is approved by the lender.

Complete your purchase

After getting pre-approved, you can make an offer on a home. When that offer is accepted, you'll go through the appraisal and inspection process. Once the home checks out and your lender reviews your financial credentials again, you close on your home loan.

Frequently asked questions about mortgages

How do I qualify for a mortgage?

To qualify for a mortgage or refinance, shop around with several lenders. When you find the best rates and terms, make sure you meet the lender's requirements for income, debt, and credit score.

You'll then provide information on your finances, so gather documents such as pay stubs and bank statements. Once you've found the right loan and have your paperwork ready, submit an application. For more information, or if you're ready to go, use our form to guide you through the process and get a mortgage pre-approval.

Can I get a mortgage with no credit?

Yes. Most lenders look at your credit report and score when determining if you qualify for a home loan. However, some lenders work with borrowers who don't have a credit history. They can review other documentation, such as utility statements, showing you have a history of making on-time payments.

Shop around for a lender that does manual underwriting and prepare financial documentation such as bank statements. Find out more in this guide to how to buy a house with no credit.

What does a mortgage payment include?

Your monthly mortgage payment includes:

  • Principal: This is the amount you pay toward the loan balance each month.
  • Interest: This is the cost you pay for borrowing. It's determined by how much you borrow and your interest rate.
  • Taxes: Most lenders collect a payment toward your property taxes each month. This money is put into an escrow account. That's a special account earmarked for such expenses. The lender pays the property tax bill out of the escrow account.
  • Insurance: Lenders also collect a monthly payment toward homeowners insurance. This is also put into escrow. Lenders then pay your insurance bill to protect the collateral (the house).

What mortgage type should I choose?

The type of mortgage you should choose depends on many factors, including your credit history, your down payment amount, the type of house you're buying, and your goals for your loan. For example, you may wish to choose a:

  • Conventional mortgage (one not guaranteed by the government) to avoid up-front fees.
  • A government-guaranteed mortgage (such as an FHA, USDA, or VA loan) if you have imperfect credit or a small down payment.
  • A 30-year fixed rate loan if you want predictable payments and don't mind paying more interest over time in exchange for a smaller monthly payment.
  • A 15-year fixed rate loan if you want predictable payments and want to pay the least amount of interest over time despite higher monthly mortgage payments.

These are just a few examples of different home loans. Research all the mortgage types before you decide.

What can I expect in the home-buying process?

To begin the process of buying a home, set a budget to ensure you're prepared to qualify for a home loan and pay a mortgage. Prepare the financial documents that mortgage lenders will want to review. Get quotes from several lenders, and pursue mortgage pre-approval from the one offering the best terms.

You may want to hire a real estate agent to help you shop for properties. When you find a home that fits your budget and criteria, make an offer, including any contingencies or conditions that must be met, such as a satisfactory inspection. Complete the formal loan approval process for the mortgage loan that best fits your needs, and close on your transaction.

This home-buyer checklist provides more insight into each of these steps, so check it out before you shop for a property.

How much should you save for a down payment?

Ideally, you will make a down payment equal to 20% of the value of the property. So if you're buying a $200,000 home, save $40,000.

However, many people don't save this much for a down payment. You could qualify for a conventional loan (not backed by the government) with as little as 3% down. Some government-backed loans don't require a down payment at all. But if you don't make a down payment or make a small one, expect to pay mortgage insurance or other upfront fees.

Whether you plan to save 20% or not, look into how to save for a down payment.

What documents do you need to apply for a mortgage?

To apply for a mortgage, you need:

  • Proof of income, such as tax returns, pay stubs, W-2s, or 1099 tax forms
  • Proof of assets, such as bank statements and investment account statements
  • A gift letter if someone is providing you with gift money for a down payment
  • A history of mortgage or rent payments, such as information from your landlord
  • Identification, such as a Social Security card or government-issued ID

Lenders may also request additional information, so read more details in our full guide to what documents are required for home loans.

What expenses of homeownership do I need to prepare for?

Expenses of homeownership to prepare for include:

  • Your mortgage payment
  • Property taxes, which are often added to your mortgage payment (your lender puts the money into a special escrow account, then pays your local government)
  • Homeowners insurance, which is also often added to your mortgage payment and paid by your lender. Check out our guide to determine how much homeowners insurance you may need
  • Mortgage insurance, which protects the lender from potential losses if you make a down payment below 20% of your home's value
  • Utilities, including electricity, gas, water, cable, and internet
  • HOA dues, if you live in a neighborhood or building with a homeowners association
  • Home maintenance and repairs, so that you aren't caught off-guard by unexpected expenses

You can learn more about all these costs in our guide to homeownership expenses.

What's the difference between a 15- and a 30-year mortgage?

With a 15-year loan, you make payments for just 15 years, as opposed to 30. The monthly amount you owe is higher on a 15-year loan than a 30-year loan because you make fewer payments. The interest rate is usually lower on a 15-year loan. And total interest costs are lower, because you pay interest for less time.

Carefully consider the pros and cons of a 15- vs. 30-year mortgage when you decide which is right for you. Additionally, you can explore 20- vs. 30-year mortgages.

What tips would you give first-time home buyers?

Some of the best tips for first-time home buyers include:

  • Save early for a down payment.
  • Take steps to improve your credit score.
  • Set a budget before shopping for a home.
  • Shop around for the most favorable mortgage interest rate and loan terms.
  • Get pre-approved before making an offer on a home.
  • Hire a real estate agent with solid credentials you feel comfortable with.
  • Research properties carefully, considering factors such as zoning laws and school districts.
  • Make an offer that protects your interest, including contingencies such as an inspection to check for major issues.
  • Save up for closing costs.

For more information, look at our first-time home-buyer tips.

Why does my debt-to-income ratio matter when applying for a mortgage?

Lenders consider your debt-to-income ratio when you apply for a mortgage because they want to know you can afford mortgage payments. They look at your:

  • Front-end ratio, which compares your monthly mortgage payments to your income
  • Back-end ratio, which compares mortgage payments and other debts to your income

If either ratio is too high, a lender won't approve your loan. For more information about lender requirements, read up on debt-to-income ratio and why it matters.

How does my credit score affect mortgage rates?

A higher credit score can result in a lower mortgage rate, since lenders view you as a low-risk borrower. A lower mortgage rate means lower monthly payments and less total interest paid over time.

A credit score on the low end can make it difficult to get approved for a loan. And lenders that do approve a mortgage will charge a higher rate. That's because credit problems suggest a greater chance a borrower will default on a loan.

Find out more about this by looking into how credit scores affect mortgage rates.

The Ascent's best mortgage lenders

If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.

Our Mortgages Expert