Mortgage Calculator

How to Use the Mortgage Calculator

A mortgage quote is one number hiding six. This calculator builds all of them: principal and interest, property tax, home insurance, HOA dues and private mortgage insurance, then prints the amortisation schedule underneath so you can see where the money actually goes.

1. Enter the home price. The agreed purchase price, not the asking price and not what you can afford — if you are still working that out, the affordability calculator comes first.
2. Set the deposit. Switch between a percentage and a fixed amount using the toggle. Twenty per cent is the threshold most lenders use for dropping mortgage insurance, and the calculator applies PMI automatically below it.
3. Enter the rate and term. Use the APR you have been quoted rather than an advertised headline rate. Thirty years is the US default; fifteen, twenty and twenty-five are all common elsewhere.
4. Fill in the escrow items. Property tax as an annual percentage of the price, insurance as an annual amount, HOA as a monthly one. These are the numbers people forget, and together they are often a quarter of the real payment.
5. Open the schedule. The table shows principal paid, interest paid and the balance remaining for every year. It is the single most useful thing on the page and the part most calculators omit.

Two figures to look at first. The escrow tile shows how much of your payment is not going to the lender at all. And the last tile shows how much of your very first payment is pure interest — on a thirty-year loan at 6.5%, it is over 85%.

Mortgage Payment Formula

The principal-and-interest part is the standard amortising payment formula. Everything else is arithmetic on top.

The escrow items are not a lender charge. Property tax goes to your local authority and insurance to your insurer; the lender simply collects a twelfth each month and pays the bills on your behalf, because an uninsured or tax-delinquent property is bad collateral.

Example

$420,000 at 6.5% over thirty years, 20% down

1. Deposit: 420,000 × 0.20 = $84,000. Loan: 420,000 − 84,000 = $336,000.
2. Monthly rate: 0.065 ÷ 12 = 0.00541667. Payments: 30 × 12 = 360.
3. Principal and interest: 336,000 × 0.00541667 ÷ (1 − 1.00541667⁻³⁶⁰) = $2,123.75.
4. Property tax: 420,000 × 0.011 ÷ 12 = $385.00. Insurance: 1,400 ÷ 12 = $116.67.
5. Total monthly payment: 2,123.75 + 385.00 + 116.67 = $2,625.42.
6. Total interest over thirty years: (2,123.75 × 360) − 336,000 = $428,549.48 — more than the loan itself.

The same house with 10% down

Halve the deposit to $42,000 and the loan becomes $378,000. Principal and interest rises to $2,389.22, and because the LTV is now 90%, PMI of $157.50 a month is added. The total payment becomes $3,048.38 — $422.96 a month more for the same house. On these figures the PMI would come off around month 95, just under eight years in, assuming no help from rising prices.

What one extra payment a year does

Add a thirteenth payment of $2,123.75 each year to the 20%-down case and the loan clears in 292 months — 24.3 years instead of 30. Total interest falls from $428,549 to $334,487, a saving of $94,063 for an extra $2,124 a year. Nothing else available to an ordinary borrower moves the number that far.

How Amortisation Front-Loads Interest

Amortisation is the part of a mortgage that surprises people, so it is worth reading the schedule closely.

In year one you pay $25,485 and reduce the debt by $3,756. Ten years in, having paid roughly $255,000, you still owe $284,848 of the original $336,000. The month at which principal finally exceeds interest in a single payment is month 233 — nineteen and a half years in.

That front-loading is not a trick. Interest is charged on the outstanding balance, and early on the balance is enormous. But it has two practical consequences worth acting on. First, overpayments made early remove interest from every remaining month, which is why the extra-payment saving above is so large. Second, moving house every five years means repeatedly restarting the most interest-heavy phase of a mortgage.

The other number worth watching is loan-to-value. It determines whether you pay PMI, what rate you are offered on a remortgage, and how much cushion you have if prices fall. The home equity calculator tracks it as the balance drops.

Five Things a Real Mortgage Does That This Model Does Not

Five things a real mortgage does that this model does not.

Rates change. If your rate is fixed for two or five years and then reverts, run the calculation twice — once at the fixed rate and once at a plausible reversion rate — and check the higher payment still fits your budget. A three-point rise on this loan adds roughly $700 a month.

Escrow is re-assessed. Property tax and insurance both drift upward, and your lender adjusts the monthly collection annually. A payment quoted today is rarely the payment in year five even on a fixed-rate loan.

Fees are not in the payment. Arrangement fees, valuation fees and legal costs are paid up front — see the closing cost calculator — and if they are added to the loan instead, increase the price field accordingly.

Day-count conventions vary. This calculator uses twelve equal months, which matches how nearly every consumer lender quotes. Some use actual days, which shifts the payment by a few units of currency.

Maintenance is missing entirely. A common planning figure is 1% of the property's value a year — $4,200 on this house, or $350 a month. It is not part of the mortgage payment and it is absolutely part of the cost of owning, which is why the rent vs buy calculator includes it explicitly.

Before settling on a price, run the affordability calculator to see what a lender's ratio test allows, and the down payment calculator to see what a larger deposit would be worth. Both change the answer here more than shopping for a slightly better rate does.