MORTGAGE
CALCULATOR

How To Calculate Your Mortgage Payments

Understanding how much you need to pay each month towards your mortgage is essential to your financial success, as your mortgage is typically your most significant expense each month.

To calculate your mortgage payment you will need to know the total amount of your loan (the purchase price minus the down payment), the loan interest rate and how many years the mortgage loan is for. Here’s a closer look at what those terms mean:

• Purchase price: This is the amount you agree to pay for the home.
• Down payment: This is the portion of the purchase price you pay upfront.
• Loan interest rate: This is the rate the loan is charging on your principal.
• Term of loan: This is how long the loan is for.

Note that you will likely have to make additional payments for your home each month outside of your mortgage payment. These can include property taxes, insurance premiums and homeowners association fees.

What Is a Fixed-Rate Mortgage?

With a fixed-rate mortgage – or FRM – you have a locked-in, fixed interest rate for the entire mortgage term. By comparison, with an adjustable-rate mortgage (ARM), the interest rate can vary over the life of the loan.

What Costs Are Included in a Mortgage Payment?

Your mortgage payments are primarily determined by your principal – the amount of money you borrowed from the lender – and the interest – the money you are charged by the lender for borrowing the money. 

However, depending on your loan terms, other costs may be included in your mortgage payment. These can include:

Property taxes: Many lenders roll property taxes in with your monthly mortgage payment. These taxes are calculated based on the tax rate in your area and the current market value of your home.

Homeowners insurance: Your homeowners insurance might be part of your monthly payment, which is deposited into your escrow account that the lender uses to pay your insurance, and perhaps your property taxes. 

Mortgage insurance: If your down payment was less than 20%, you will likely have to take out PMI, or private mortgage insurance. This policy protects your lender in the event that you are unable to make your payments.

Types of Mortgage Loans

Mortgage loans can vary in the amount you can borrow and the interest rate you’ll pay. Here’s a look at some of the most common types of mortgage loans available.

Fixed-rate mortgage: With a fixed-rate mortgage, the interest rate the borrower pays is fixed over the life of the mortgage loan and all payments are equal in size.

Adjustable-rate mortgage: The introductory interest rate on an adjustable-rate mortgage loan tends to be lower than that of a fixed-rate mortgage. However, the interest rate eventually resets to reflect current market conditions and the rate can fluctuate over the length of the loan.

Interest-only mortgage: The borrower only makes interest payments to begin with and does not put any money toward the principal amount borrowed. After the interest-only period, payment balances increase and money is applied to both the principal and interest.

Jumbo loan: A jumbo mortgage loan is a home loan that exceeds conforming loan limits. In most of the U.S., the 2023 maximum conforming loan limit for one-unit properties is $726,200, according to the Federal Housing Finance Agency.

Reverse mortgage: When you take out a reverse mortgage, the lender makes payments to you, the homeowner, rather than the other way around. A reverse mortgage can help senior homeowners get access to funds to cover living expenses while also remaining in their homes.

FHA loan: An FHA loan is one that is insured by the Federal Housing Administration. FHA loans are designed specifically to help first-time homebuyers and buyers with lower income or past credit problems get a mortgage.

VA loan: Veterans of the U.S. Military can obtain a federally guaranteed home with no down payment.

Subprime mortgage: Subprime mortgage loans are a class of loans that are offered at a higher rate to borrowers who are unable to qualify for lower-interest loans from conventional sources.

*Disclaimer: This calculator provides an estimate based on the information provided, and is not intended to be a substitute for professional financial advice.