Mortgage Calculator
Calculate your monthly mortgage payment and total interest costs
How to Use This Calculator
Using this mortgage calculator is straightforward and takes just a few seconds to get accurate estimates for your home loan.
Step 1: Enter the total home price you are considering. This is the purchase price of the property, not the loan amount.
Step 2: Input your planned down payment in dollars. The calculator will automatically show what percentage this represents of the home price.
Step 3: Enter the annual interest rate. Check current rates from lenders or use 7% as a reasonable estimate for planning purposes in today's market.
Step 4: Select your preferred loan term. Most buyers choose between 15-year and 30-year mortgages, though 10 and 20-year options are also available.
Step 5: Click "Calculate Payment" to see your estimated monthly payment, total interest, and overall loan cost.
Common mistakes to avoid: Do not confuse home price with loan amount. Remember that this calculator shows principal and interest only, not property taxes, insurance, or PMI. Always verify current interest rates with actual lenders before making decisions.
Understanding Mortgages
A mortgage is a secured loan used to purchase real estate, where the property itself serves as collateral. If you fail to make your payments, the lender has the legal right to take ownership of your home through a process called foreclosure. Understanding how mortgages work is essential for making one of the largest financial decisions of your life.
When you take out a mortgage, you borrow a specific amount of money called the principal. Over the life of the loan, you repay this principal plus interest. In the early years of your mortgage, the majority of each payment goes toward interest rather than reducing your principal balance. As time passes, this ratio gradually shifts, with more of each payment going toward principal. This process is called amortization.
Types of Mortgages
Fixed-Rate Mortgages: The most popular option, offering the same interest rate and monthly payment for the entire loan term. This predictability makes budgeting easier and protects you from rising interest rates.
Adjustable-Rate Mortgages (ARMs): These start with a lower interest rate that adjusts periodically based on market conditions. Common structures include 5/1 or 7/1 ARMs, where the rate is fixed for 5 or 7 years, then adjusts annually. ARMs can be risky if rates rise significantly.
FHA Loans (US): Backed by the Federal Housing Administration, these loans allow down payments as low as 3.5% and have more flexible credit requirements. They are popular with first-time buyers but require mortgage insurance premiums.
VA Loans (US): Available to eligible veterans and active military members, VA loans offer excellent terms including no down payment requirement and no private mortgage insurance.
CMHC-Insured Mortgages (Canada): The Canada Mortgage and Housing Corporation insures mortgages with down payments as low as 5%, enabling more Canadians to purchase homes. Mortgage insurance premiums are added to the loan amount.
How Interest Rates Affect Your Payment
Even small differences in interest rates can dramatically impact your total loan cost. On a $300,000 30-year mortgage, the difference between a 6% and 7% rate means paying approximately $70,000 more in interest over the life of the loan. This is why shopping for the best rate and maintaining a strong credit score are so important.
The Role of Down Payment and PMI
Your down payment directly affects how much you need to borrow and your monthly payment. Putting down 20% or more allows you to avoid private mortgage insurance (PMI), which typically costs 0.5% to 1% of your loan amount annually. PMI protects the lender, not you, if you default on the loan. Many buyers who cannot afford 20% down opt to pay PMI initially and request its removal once they reach 20% equity.
Frequently Asked Questions
What's a good mortgage interest rate?
A "good" mortgage rate depends on current market conditions, which fluctuate based on Federal Reserve policies and economic factors. As of recent years, rates have ranged from historic lows around 2.65% in early 2021 to over 7% in 2023-2024. Generally, a good rate is one that is at or below the current national average for your loan type and term. Borrowers with excellent credit scores (740+) typically qualify for the best available rates, often 0.25% to 0.5% lower than average.
How much house can I afford?
Financial experts recommend following the 28/36 rule: your monthly housing costs (including mortgage, taxes, and insurance) should not exceed 28% of your gross monthly income, and your total debt payments should stay below 36%. For example, if you earn $6,000 per month before taxes, aim for housing costs under $1,680. Lenders will also consider your credit score, employment history, and existing debts when determining how much they will lend you.
Should I get a 15-year or 30-year mortgage?
This depends on your financial situation and goals. A 30-year mortgage offers lower monthly payments, making it easier to qualify and leaving more room in your budget. However, you will pay significantly more in total interest. A 15-year mortgage has higher monthly payments but saves you tens of thousands in interest and builds equity faster. Choose a 15-year if you can comfortably afford the higher payment without sacrificing other financial goals like retirement savings.
What is PMI and how do I avoid it?
Private Mortgage Insurance (PMI) is required by lenders when your down payment is less than 20% of the home's purchase price. PMI typically costs between 0.5% and 1% of your loan amount annually, added to your monthly payment. To avoid PMI entirely, put down 20% or more. Alternatively, some lenders offer lender-paid PMI with a slightly higher interest rate, or you can request PMI cancellation once you reach 20% equity through payments or home appreciation.
How does my credit score affect my mortgage rate?
Your credit score is one of the most significant factors determining your mortgage interest rate. Borrowers with scores of 760 or higher typically receive the best rates. Each credit score tier below that can add 0.25% to 0.5% or more to your rate. On a $300,000 loan, a 1% higher rate costs you approximately $200 more per month and $70,000+ over 30 years. Before applying for a mortgage, check your credit report for errors and work to improve your score if needed.
What are closing costs?
Closing costs are fees and expenses you pay when finalizing your mortgage, typically ranging from 2% to 5% of the loan amount. These include lender fees (origination, underwriting), third-party fees (appraisal, title insurance, home inspection), and prepaid items (property taxes, homeowners insurance, prepaid interest). On a $300,000 loan, expect closing costs between $6,000 and $15,000. Some of these costs are negotiable, and sellers sometimes agree to contribute toward closing costs.
Can I pay off my mortgage early?
Most conventional mortgages allow early payoff without penalty, though you should verify this in your loan documents. Making extra payments toward principal can significantly reduce your total interest and shorten your loan term. Even one extra payment per year can shave 4-5 years off a 30-year mortgage. Some homeowners set up biweekly payments (26 half-payments per year equals 13 full payments) to accelerate payoff. Always specify that extra payments should go toward principal, not future payments.
What's the difference between pre-qualified and pre-approved?
Pre-qualification is an informal estimate of how much you might be able to borrow, based on self-reported financial information. It takes minutes and provides a general idea of your buying power. Pre-approval is a more rigorous process where the lender verifies your income, assets, credit, and employment. You receive a conditional commitment for a specific loan amount, which shows sellers you are a serious buyer. Pre-approval typically requires documentation and a credit check, and the approval usually expires after 60-90 days.
Mortgage Examples
First-Time Homebuyer
Sarah is purchasing her first home priced at $300,000 with a 20% down payment ($60,000). With a 6.5% interest rate on a 30-year fixed mortgage, her loan amount is $240,000. Her monthly principal and interest payment comes to $1,517. Over the life of the loan, she will pay $306,108 in interest, bringing the total cost to $546,108. By putting down 20%, Sarah avoids PMI and secures a manageable payment that fits within the 28% housing cost guideline based on her $72,000 annual salary.
Luxury Home Purchase
Michael and Jennifer are buying a $600,000 home with 25% down ($150,000). With excellent credit, they secure a 6.25% rate on a 30-year mortgage for $450,000. Their monthly payment is $2,771. Total interest over 30 years: $547,452. They chose the 30-year term for payment flexibility, but plan to make extra principal payments when possible to reduce total interest costs.
Refinancing Scenario
David has a $250,000 remaining balance on his mortgage at 7.5% with 22 years left. By refinancing to a new 20-year loan at 6.5%, his payment decreases from $1,979 to $1,866, saving $113 per month. More importantly, he will save approximately $35,000 in total interest over the life of the loan, even after accounting for $6,000 in closing costs. The break-even point for his refinance is about 53 months.
Tips for Getting the Best Mortgage
- Check your credit score first: Review your credit reports from all three bureaus at AnnualCreditReport.com. Dispute any errors and work on improving your score for at least 3-6 months before applying. A score above 740 qualifies you for the best rates.
- Shop multiple lenders: Get quotes from at least 3-5 different lenders, including banks, credit unions, and online lenders. Rates and fees can vary significantly. All credit inquiries within a 45-day window count as a single inquiry for scoring purposes.
- Consider total cost, not just monthly payment: A lower monthly payment often means more interest paid over time. Compare the total cost of different loan options, including all fees and interest charges over the full term.
- Save for more than the minimum: While you can buy a home with 3-5% down, putting down more reduces your loan amount, monthly payment, and total interest. Aim for 20% to avoid PMI.
- Get pre-approved before house hunting: Pre-approval shows sellers you are serious and gives you a clear budget. It also helps you identify and address any issues before you find your dream home.
Sources: Consumer Financial Protection Bureau (CFPB), U.S. Department of Housing and Urban Development (HUD)
How to use this mortgage calculator
This calculator helps you understand your potential mortgage costs before you start shopping for a home. Here is how to use it effectively:
- Enter the home price you are considering. If you are just exploring, try different price points to see what fits your budget.
- Enter your down payment amount. The calculator will show what percentage this represents. Most financial advisors recommend putting down at least 20% to avoid private mortgage insurance.
- Enter the interest rate you expect to receive. Check current mortgage rates online or get pre-approved by a lender for a personalized rate. Even small differences in rate significantly affect your total cost.
- Select your loan term from 10, 15, 20, or 30 years. Shorter terms mean higher monthly payments but much less interest paid overall.
- Click calculate to see your estimated monthly payment, total interest, and total cost of the loan.
Remember that your actual monthly payment will likely include property taxes, homeowners insurance, and possibly private mortgage insurance, which are not included in this basic calculation.
Understanding how mortgages work
A mortgage is a loan specifically used to purchase real estate, where the property itself serves as collateral for the loan. If you fail to make payments, the lender can take possession of the property through foreclosure. Understanding the mechanics of mortgages helps you make better financial decisions when buying a home.
When you take out a mortgage, you borrow a specific amount called the principal. You then pay back this principal plus interest over the loan term. In the early years of a mortgage, most of your monthly payment goes toward interest rather than principal. This gradually shifts over time, with more going toward principal as the loan matures. This process is called amortization.
The interest rate is the cost of borrowing money, expressed as a percentage of the loan amount. Mortgage rates fluctuate based on broader economic conditions, Federal Reserve policies, and your individual creditworthiness. The difference between a 6% and 7% interest rate may seem small, but on a $300,000 loan over 30 years, that 1% difference means paying roughly $70,000 more in interest.
Your down payment is the amount you pay upfront when purchasing the home. A larger down payment reduces the amount you need to borrow, resulting in lower monthly payments and less interest over time. Putting down 20% or more also allows you to avoid private mortgage insurance, an additional monthly cost that protects the lender if you default.
Comparing loan terms: 15-year versus 30-year mortgages
The loan term you choose significantly impacts both your monthly payment and total cost. Here is a detailed comparison to help you decide:
30-year mortgage advantages
- Lower monthly payments: Spreading the loan over 30 years results in more affordable monthly payments, making homeownership accessible to more people.
- Greater flexibility: Lower required payments leave room in your budget for other investments, emergencies, or lifestyle expenses.
- Qualification: The lower payment makes it easier to qualify for a larger loan amount.
30-year mortgage disadvantages
- More total interest: You pay significantly more interest over the life of the loan, often more than doubling the purchase price.
- Slower equity building: It takes longer to build substantial equity in your home.
- Higher interest rates: 30-year mortgages typically have slightly higher interest rates than 15-year loans.
15-year mortgage advantages
- Less total interest: You save tens of thousands, sometimes hundreds of thousands, in interest payments.
- Faster equity building: You own your home outright in half the time, providing financial security.
- Lower interest rates: Lenders typically offer lower rates for shorter terms.
15-year mortgage disadvantages
- Higher monthly payments: Payments can be 40-50% higher than a 30-year mortgage for the same loan amount.
- Less flexibility: Higher required payments leave less room for other financial goals or unexpected expenses.
- Qualification challenges: The higher payment may limit how much house you can afford.
Mortgage calculation examples
Here are real-world examples showing how different scenarios affect your mortgage costs:
Example 1: typical first home purchase
A first-time buyer purchases a $350,000 home with 10% down ($35,000) at 7% interest for 30 years.
- Loan amount: $315,000
- Monthly payment: $2,096
- Total interest paid: $439,458
- Total cost: $754,458
Example 2: same home with 20% down
The same $350,000 home with 20% down ($70,000) at 7% interest for 30 years.
- Loan amount: $280,000
- Monthly payment: $1,863
- Total interest paid: $390,628
- Total cost: $670,628
- Savings versus 10% down: $83,830 (plus avoiding PMI)
Example 3: 15-year versus 30-year comparison
Comparing a $280,000 loan at 6.5% interest for different terms:
- 30-year: $1,770/month, $357,360 total interest
- 15-year: $2,441/month, $159,438 total interest
- Savings with 15-year: $197,922 in interest
The mortgage payment formula
This calculator uses the standard amortization formula used by banks and lenders to calculate fixed-rate mortgage payments:
Where:
M = monthly payment
P = principal (loan amount)
r = monthly interest rate
n = total number of payments (years × 12)
US vs Canadian Mortgages
United States: Interest compounds monthly. The monthly rate is simply the annual rate divided by 12.
Canada: By law, fixed-rate mortgages compound semi-annually. This means the effective monthly rate is calculated differently: first the annual rate is converted to an equivalent semi-annual rate, then to a monthly rate. This results in slightly lower payments compared to monthly compounding at the same stated rate.
For example, for a $280,000 loan at 7% annual interest for 30 years:
- US (monthly compounding): $1,863/month
- Canada (semi-annual compounding): $1,841/month
Frequently asked questions
How much house can I afford?
A common guideline is that your monthly housing costs should not exceed 28% of your gross monthly income. This includes your mortgage payment, property taxes, and insurance. Lenders also look at your total debt-to-income ratio, which should typically be below 36% (including car payments, student loans, and other debts). For example, if you earn $6,000 per month, aim for housing costs under $1,680.
What is a good down payment for a house?
While 20% is traditionally recommended because it allows you to avoid private mortgage insurance, many buyers put down less. FHA loans allow as little as 3.5% down, and some conventional loans accept 3-5%. However, a larger down payment means lower monthly payments, less interest paid over time, and often a better interest rate. Weigh the benefits of a larger down payment against other financial goals like maintaining an emergency fund.
What is PMI and how can I avoid it?
Private mortgage insurance (PMI) is required by lenders when you put down less than 20%. It typically costs 0.5-1% of the loan amount annually and protects the lender if you default. You can avoid PMI by putting down 20% or more, or you can request its removal once you reach 20% equity in your home.
Should I pay points to lower my interest rate?
Mortgage points are upfront fees you pay to reduce your interest rate, with one point typically costing 1% of the loan amount and reducing your rate by 0.25%. This makes sense if you plan to stay in the home long enough to recoup the upfront cost through lower monthly payments. Calculate your break-even point by dividing the cost of points by your monthly savings.
What costs are not included in this calculator?
This calculator shows principal and interest only. Your actual monthly payment will also include property taxes, homeowners insurance, and possibly PMI and HOA fees. These additional costs can add hundreds of dollars to your monthly payment. Use this calculator as a starting point, then add estimates for these other costs for a complete picture.
How do interest rates affect my mortgage?
Interest rates have a dramatic impact on total cost. On a $300,000 30-year mortgage, a rate of 6% results in about $347,000 in total interest, while a rate of 7% results in about $418,000 in interest. That 1% difference costs you over $70,000. Shopping for the best rate is one of the most impactful financial decisions when buying a home.
Can I pay off my mortgage early?
Most mortgages allow extra payments without penalty, though you should verify this with your lender. Even small additional payments can significantly reduce your total interest and loan term. Paying just one extra payment per year can shorten a 30-year mortgage by several years.
What credit score do I need for a mortgage?
Conventional loans typically require a minimum credit score of 620, while FHA loans may accept scores as low as 580 (or 500 with a larger down payment). However, higher scores qualify you for better interest rates. A score above 740 typically gets you the best available rates.
Tips for first-time home buyers
- Get pre-approved before shopping: A pre-approval letter shows sellers you are a serious buyer and gives you a realistic budget to work with.
- Shop multiple lenders: Interest rates and fees vary between lenders. Getting quotes from at least three lenders can save you thousands over the life of your loan.
- Consider all costs: Beyond the mortgage payment, budget for closing costs (typically 2-5% of the loan), moving expenses, and any immediate repairs or furnishings.
- Maintain financial stability: Avoid making major purchases or changing jobs during the mortgage process, as this can affect your approval.
- Build an emergency fund: Aim to have 3-6 months of expenses saved beyond your down payment and closing costs for unexpected repairs or income disruptions.
- Understand your local market: Research comparable sales in the area to ensure you are paying a fair price for the property.
- Get a home inspection: Never skip the inspection. It can reveal costly problems and give you negotiating leverage.
Did you know?
- On a $300,000 30-year mortgage at 7%, you will pay approximately $418,000 in interest alone, more than the original loan amount.
- The word "mortgage" comes from Old French, meaning "death pledge" because the deal dies when paid off or when the property is seized through foreclosure.
- Making just one extra payment per year toward principal can shorten a 30-year mortgage by 4-5 years and save tens of thousands in interest.
- The first modern mortgage in America was issued in 1934 when the Federal Housing Administration was created, allowing buyers to finance homes with small down payments.
- Mortgage interest rates hit historic lows of around 2.65% in January 2021 during the pandemic, compared to peaks above 18% in the early 1980s.