Understanding Your Mortgage Payment

A mortgage payment is a regular payment you make to the lender who financed your home purchase. For most homeowners this payment is not just for the loan itself. It often includes other costs related to homeownership. Our calculator helps you estimate this total amount which is commonly known as PITI.

How to Use the Calculator

To get an accurate estimate of your monthly mortgage payment simply fill in the fields with your information. Here is a brief explanation of each input:

• Home Price: This is the full purchase price of the home you intend to buy.
• Down Payment: The amount of money you pay upfront towards the home's purchase. This is subtracted from the home price to determine the loan amount.
• Loan Term: This is the length of time you have to repay the loan. Common terms are 15 or 30 years. Shorter terms usually mean higher monthly payments but less interest paid over time.
• Interest Rate: The annual rate charged by the lender for the loan. Your credit score and market conditions influence this rate.
• Property Taxes (Annual): This is the amount you pay in taxes to your local government each year. The calculator divides this by 12 to add it to your monthly payment.
• Homeowners Insurance (Annual): Lenders require you to have insurance to protect the property. This is the annual cost of that policy.

The Components of PITI

PITI stands for Principal Interest Taxes and Insurance. These are the four main components that make up a typical monthly mortgage payment.

• Principal: This is the portion of your payment that goes toward paying down the original loan balance. In the beginning of a loan most of your payment goes to interest. Over time more of it shifts toward paying down the principal.
• Interest: This is the cost of borrowing the money from the lender. It is calculated as a percentage of your outstanding loan balance.
• Taxes: Property taxes are collected by your lender and held in an escrow account. The lender then pays the tax bills on your behalf when they are due.
• Insurance: This includes homeowners insurance which protects against damage to your home. It can also include Private Mortgage Insurance (PMI).

What Is Private Mortgage Insurance (PMI)?

Private Mortgage Insurance or PMI is a type of insurance that protects the lender if you are unable to make your payments. Lenders typically require PMI if your down payment is less than 20 percent of the home's purchase price. This is because a smaller down payment is seen as a higher risk. The cost of PMI is usually a percentage of the loan amount and is added to your monthly payment. Our calculator automatically determines if PMI might be needed and includes an estimate in the total.

Choosing a Loan Term

The loan term has a significant impact on your monthly payment and the total interest you will pay. A 30 year loan is the most common choice because it offers the lowest monthly payment. This makes homeownership more affordable for many people. However you will pay much more in total interest over the life of a 30 year loan. A 15 year loan has a higher monthly payment. The benefit is that you will pay off your home faster and save a substantial amount of money on interest. You can use our calculator to compare the monthly payments for different loan terms to see what fits your budget.

Disclaimer: This calculator provides an estimate for informational purposes only. It is not a guarantee of credit. Your actual payment may vary. Please consult a qualified financial advisor or mortgage lender for personalized advice.