A mortgage is the biggest financial commitment most people will ever make — and a difference of just 1% in your interest rate can cost or save you over $60,000 on a $400,000 loan. This calculator shows you exactly what a home loan costs before you sign anything.
Enter your home price, down payment, rate, and term. In seconds, you'll see your total monthly payment broken down by component, a chart showing how your balance shrinks year by year, and the exact month your mortgage is paid off.
What Is a Mortgage?
A mortgage is a loan secured by real property — the home itself is the collateral. If you stop making payments, the lender has the legal right to foreclose: take possession of the property and sell it to recover the outstanding balance.
The two most common types in the United States are fixed-rate mortgages, where the interest rate stays the same for the entire loan term, and adjustable-rate mortgages (ARMs), where the rate is fixed for an initial period and then resets periodically based on a market index. This calculator models a fixed-rate mortgage — the choice most buyers make for payment predictability.
Why Your Mortgage Rate Matters
Interest is the fee you pay for borrowing. On a $400,000 loan at 7% for 30 years, you'll pay roughly $559,000 total — that's $159,000 in interest, nearly 40% above what you borrowed. At 6%, total interest drops to about $464,000. A single percentage point costs $95,000 over the life of the loan.
Lenders price your rate based on your credit score, loan-to-value ratio (LTV), debt-to-income ratio, and current bond market conditions. Improving any of those factors before applying can meaningfully lower your rate. A score jump from 680 to 760 alone can shave 0.5–1% off the rate you're offered.
The Mortgage Formula Explained
Your monthly principal and interest payment is calculated using the standard amortization formula. Here's how it works, in plain English first: each month, you pay the interest that has accrued on your remaining balance, and whatever is left over reduces the balance. Early in the loan, almost all of your payment goes to interest because the balance is high; by the end, almost all goes to principal.
Each variable represents:
- M — your fixed monthly payment (principal and interest only)
- P — the loan principal (home price minus down payment)
- r — the monthly interest rate (annual rate ÷ 12 ÷ 100)
- n — the total number of monthly payments (loan term in years × 12)
The formula guarantees that after exactly n payments, your balance reaches zero. Every payment is identical in size, which is why fixed-rate mortgages are so predictable.
Step-by-Step Example
Marcus is buying a $450,000 home in Austin with a 20% down payment ($90,000), a 30-year fixed mortgage at 6.75%, property taxes of 1.8% annually, and homeowner's insurance of $1,800 per year.
- Loan amount (P): $450,000 − $90,000 = $360,000
- Monthly rate (r): 6.75% ÷ 12 = 0.5625% = 0.005625
- Number of payments (n): 30 × 12 = 360
Monthly P&I = 360,000 × [0.005625 × (1.005625)³⁶⁰] ÷ [(1.005625)³⁶⁰ − 1] ≈ $2,335
Because Marcus puts down exactly 20%, he avoids PMI entirely. His full monthly cost:
- Principal & Interest: $2,335
- Property tax: 1.8% × $450,000 ÷ 12 = $675
- Home insurance: $1,800 ÷ 12 = $150
- Total monthly (PITI): $3,160
Total interest over 30 years: $480,604. Total cost of ownership (loan amount + interest): $840,604 — before taxes and insurance, which add another $295,200 over 30 years at those rates.
How to Read Your Results
Total Monthly Payment
This is your complete monthly housing obligation. If you only entered the four main inputs (price, down payment, rate, term), it equals principal and interest only. Add optional fields to see a true PITI figure.
Total Interest Paid
This is the real cost of borrowing. Compare it to your loan amount: if you're paying 40%+ of the purchase price in interest, a larger down payment or shorter term deserves a serious look. Even half a percentage point in rate reduction here changes the number by tens of thousands.
Payoff Date
This moves earlier every time you add extra monthly payments. Enter $200 extra per month on a 30-year loan and watch the payoff date jump forward by four to six years. The savings are front-loaded — early extra payments reduce the balance when it's highest, so less interest accrues every subsequent month.
Amortization Table
The annual schedule shows what happens to your balance year by year. In year one, most of your payment goes to interest. By year 20 or so, the split flips — most goes to principal. The balance column shows your equity building in real dollar terms.
Factors That Affect Your Results
Interest rate is the single largest lever. A 0.5% rate difference on a $350,000 loan changes your monthly payment by about $100 and your total interest by over $35,000. Shop at least three lenders before locking in a rate.
Loan term controls both your monthly payment and total cost. A 15-year loan typically carries a 0.5–0.75% lower rate than a 30-year and builds equity twice as fast, but the monthly payment is 30–40% higher. A 20-year term splits the difference.
Down payment has two effects: it directly reduces your loan principal, and crossing the 20% threshold eliminates PMI. Putting down an extra $20,000 on a $400,000 home saves roughly $83/month in PMI on top of the lower principal payment.
Property taxes vary dramatically by state and county — from 0.3% in Hawaii to over 2.1% in New Jersey and Illinois. On a $400,000 home, the difference between a 0.5% and a 2% tax rate is $500 per month. Always verify the local rate before you budget.
This calculator assumes a fixed rate and no missed payments. Adjustable-rate mortgages, interest-only loans, and balloon mortgages require different formulas that this tool does not model.
Common Mistakes to Avoid
Forgetting property tax and insurance. This is the most common mistake first-time buyers make. They see the base P&I payment and assume that's their monthly cost — then discover their actual PITI is $400–$800 higher once the lender sets up an escrow account. Always use the "Additional Options" section of this calculator to get a realistic total.
Ignoring PMI when putting down less than 20%. PMI adds $100–$300 per month on a typical loan and is pure cost with no equity benefit. Budget for it explicitly, and note the month you'll reach 20% equity to request cancellation from your lender — it does not automatically stop at that threshold (you must request it in writing under the Homeowners Protection Act).
Comparing loans by monthly payment alone. A lower payment from a 30-year loan versus a 15-year looks attractive until you add up total interest. You might be paying $100,000+ more over the life of the loan for a $200 monthly payment saving. Run both scenarios here before deciding.
Using the maximum pre-approval amount as a budget. Lenders approve you for the most they can justify based on income ratios, not the most you can comfortably afford. A payment that consumes 40% of gross income leaves little room for maintenance, property tax increases, or unexpected expenses. Many financial advisors recommend keeping housing below 28–30% of gross income.
When to Talk to a Professional
Talk to a mortgage broker or loan officer before you start house shopping, not after. Pre-approval locks in a rate window, clarifies your actual buying power, and makes your offers competitive. In a hot market, sellers frequently reject offers from buyers without pre-approval.
If your credit score is below 620, talk to a non-profit credit counselor before applying. Six months of targeted improvement — paying down revolving balances and resolving errors on your credit report — can move your score 50–80 points and qualify you for dramatically better terms. The Consumer Financial Protection Bureau (CFPB) maintains a list of approved counseling agencies at consumerfinance.gov.
A HUD-certified housing counselor provides free, unbiased guidance on loan types, down payment assistance programs, and first-time buyer grants specific to your state and county. Search the directory at hud.gov — the consultation is free and typically takes about an hour.