How a mortgage payment is calculated
A fixed-rate mortgage uses the standard amortization formula so every monthly payment stays the same. The share of principal you owe gradually increases each month, while the interest portion drops.
On top of principal and interest, a typical monthly payment also includes one-twelfth of the annual property tax and homeowners insurance (the escrow portion), monthly HOA dues if you have them, and private mortgage insurance whenever the loan-to-value is above 80%.
Example
$400,000 home with 20% down ($80,000), 30-year term at 6.5%, 1.1% property tax, $1,500/yr insurance, $275/mo HOA, 0.5% PMI.
- Loan amount: $400,000 − $80,000 = $320,000
- Principal & interest (P&I): ~$2,023/month
- Escrow (taxes + insurance): ~$492/month
- HOA: $275/month
- LTV = exactly 80% → no PMI
- Total monthly: ~$2,790
Over 30 years you pay about $408,000 in P&I (including roughly $88,000 in interest), plus escrow, HOA and PMI where applicable.
Notes and assumptions
- Down payment mode: the calculator accepts either a dollar amount or a percent of the home price. Use whichever is easier, then switch modes to compare.
- PMI logic: the monthly amortization schedule drops PMI in the first month where the starting balance drops to 80% or less of the original home price. Your actual lender may require a written request or an appraisal; treat the schedule as an estimate.
- Escrow: annual property tax and insurance are divided by 12 to produce a flat monthly figure. Real-world escrow accounts are re-analyzed each year and may change slightly.
- HOA fees: Homeowners Association dues vary widely and sometimes cover utilities, insurance or maintenance. Enter the monthly amount exactly as listed in the property disclosure.
- This calculator stores values in the page address so you can share a quote with a partner or agent. Nothing is sent to a server.
Frequently asked questions
What is the ideal down payment in the U.S.?
20% avoids private mortgage insurance (PMI) on a conforming loan. Programs like FHA, VA and USDA accept much lower down payments (3.5%, 0%) in exchange for ongoing mortgage insurance or funding fees.
When does PMI drop off automatically?
For most conventional loans, servicers must remove PMI at the midpoint of the amortization schedule or when you submit proof that the loan balance is ≤ 78% of the original value. Our schedule estimates the earlier of the two using balance-only math.
Why are 15-year mortgages cheaper in total?
The interest rate is usually lower, and you pay for half as many years, so the total interest is dramatically smaller. The trade-off is a significantly higher monthly P&I.
Should I pay points or take a higher rate?
One point is 1% of the loan amount, paid upfront in exchange for a lower rate. Compare the monthly savings against the closing cost: if you break even within five years, points are usually worth it.