Mortgage Calculator

How Does a Mortgage Calculator Work?

A mortgage calculator simplifies a complex financial formula to give you a clear estimate of your monthly housing payment. It primarily uses three key pieces of data you provide:

• Loan Amount (Principal): The total amount of money you are borrowing from the lender after your down payment.
• Interest Rate: The annual percentage rate (APR) the lender charges for the loan.
• Loan Term: The length of time you have to repay the loan, typically 15 or 30 years.

Using these inputs, the calculator determines the fixed monthly payment that covers both a portion of the principal and the interest accrued. Our tool also shows you the total interest you'll pay over the life of the loan, highlighting the long-term costs of borrowing.

Frequently Asked Questions (FAQs)

What is principal and interest?
Principal is the amount of money you borrowed. Interest is the cost of borrowing that money. In the early years of your mortgage, a larger portion of your monthly payment goes toward interest. Over time, as you pay down the loan, more of your payment shifts toward paying down the principal.

Does this calculator include taxes and insurance (PITI)?
This calculator focuses on the core principal and interest payment. Your actual monthly payment will also include property taxes, homeowners' insurance, and potentially private mortgage insurance (PMI) if your down payment is less than 20%. This combined payment is often referred to as PITI.

How can I lower my monthly mortgage payment?
There are several ways to lower your payment: 1) Make a larger down payment to reduce the loan amount, 2) Secure a lower interest rate by improving your credit score, or 3) Choose a longer loan term (e.g., 30 years instead of 15), though this means you'll pay more in total interest over time.