How Our Mortgage Calculator Works

Your monthly principal-and-interest (P&I) payment uses the standard fully-amortizing fixed-rate mortgage formula:

M = P × [ r(1 + r)^n ] / [ (1 + r)^n − 1 ]

P = loan amount  (home price − down payment)
r = monthly interest rate  (annual rate ÷ 12)
n = total number of monthly payments  (years × 12)

Example: a $400,000 loan at 6.75% for 30 years gives r = 0.005625 and n = 360, producing a monthly P&I of about $2,594.39. Every dollar in our calculator follows this formula — no rounding shortcuts, no marketing math.

The amortization schedule applies this formula iteratively: each month, interest is computed on the remaining balance, principal is the leftover, and the balance shrinks until it hits zero on the final payment.

Private Mortgage Insurance is automatically included whenever your down payment is less than 20% of the home price. We use an annual PMI rate of 0.5% of the loan balance, divided by 12 for the monthly cost.

Real-world PMI ranges from roughly 0.3%–1.5% depending on credit score, loan-to-value ratio, debt-to-income, and the specific insurer. We picked 0.5% because it sits near the median for a borrower with mid-700s credit and 5–15% down — the most common first-time-buyer profile. See our full PMI guide for how to lower it.

PMI in our model automatically drops off the moment your projected balance hits 78% of the original home price (the federal Homeowners Protection Act trigger). FHA mortgage insurance (MIP) follows different rules and is covered separately in our FHA guide.

Property tax defaults to 1.2% of home value annually — the U.S. national average per ATTOM and Census ACS data. You should override this with your county's actual rate; New Jersey averages 2.2%, Hawaii is closer to 0.3%, and Texas often exceeds 1.8%.

Homeowners insurance defaults to 0.5% of home value annually, roughly aligned with the U.S. average premium of about $1,400/year on a $300K home (Insurance Information Institute, 2024). High-risk regions (coastal Florida, wildfire-prone California, tornado alley) can be 2–4× higher.

Both of these are billed annually but typically collected monthly into an escrow account by your servicer. We add 1/12th of each to your monthly payment so you see the true PITI (Principal, Interest, Taxes, Insurance) total.

HOA fees default to $0 because most single-family homes don't have one. If you're buying a condo, townhome, or planned community, enter the actual monthly dues — they can range from $50 to $1,500+ and are not negotiable. HOA dues are added to the monthly total but are paid directly to the association, not through escrow.

• Closing costs — these are paid once at signing, not monthly. We treat them separately in our closing-costs guide.
• Mortgage points — buying down the rate complicates the comparison; we recommend modeling each scenario separately.
• Adjustable-rate mortgages (ARMs) — the calculator assumes a fixed rate for the entire term. ARM resets are non-deterministic and depend on future index movements.
• Tax deductibility — mortgage interest may be deductible, but only if you itemize and the impact depends on your bracket and SALT cap. We don't bake that into the monthly number.
• Maintenance — most experts recommend budgeting 1–2% of home value annually. It's real, but it's not a mortgage payment.

• Consumer Financial Protection Bureau (CFPB) — mortgage disclosure and PMI rules
• Homeowners Protection Act (HPA) of 1998 — automatic PMI termination thresholds
• Federal Reserve Economic Data (FRED) — historical 30-year fixed mortgage rates
• ATTOM Data Solutions — property tax averages by state and county
• Insurance Information Institute — homeowners insurance premium benchmarks
• Federal Housing Administration (FHA) — MIP schedules and loan limits
• Federal Housing Finance Agency (FHFA) — conforming loan limits