How your mortgage payment is calculated
The principal and interest payment uses the standard amortization formula M = P × r ÷ (1 − (1 + r)−n), where r is the monthly rate and n the number of payments. Property tax, insurance, HOA and PMI are added to show your full housing cost (often called PITI).
PMI
With a conventional loan and less than 20% down, lenders charge private mortgage insurance. Under the Homeowners Protection Act it must be cancelled automatically when your balance is scheduled to reach 78% of the original value; you can request removal at 80%.
Paying extra
Extra payments go straight to principal, cutting both the total interest and the life of the loan. Even $100–$200 a month can save tens of thousands of dollars on a 30-year mortgage.
FAQ
How much house can I afford?
Lenders often cap total housing cost at about 28% of gross monthly income and all debt payments at about 36–43%. Use the calculator to keep your monthly payment within that range.
Is a 15-year mortgage better than 30-year?
A 15-year loan usually has a lower rate and far less total interest, but a much higher monthly payment. A 30-year loan with extra payments offers flexibility.
When does PMI go away?
On conventional loans, PMI ends automatically when the loan balance is scheduled to reach 78% of the original home value, or you can ask to cancel it at 80%.