Mortgage Payment Calculator

What Is a Mortgage Payment?

A mortgage payment is a recurring amount that a borrower owes to their lender when using a lender's home financing services. These payments can be made weekly, bi-weekly, or monthly. Mortgage payments generally consist of the principal, interest, taxes, and insurance. These four are often called PITI. The principal of your mortgage payment reduces your remaining loan balance. The interest represents the cost of borrowing money. Property taxes are collected by your lender in escrow to ensure timely payment to your local government. The insurance component consists of your homeowners and private mortgage insurance (PMI). PMI is present if your down payment was less than 20% of the home's price.

Why Use a Mortgage Payment Calculator?

A mortgage payment calculator facilitates sound decisions on your largest financial commitment for both potential homebuyers and existing homeowners. Since mortgage payment calculators can provide you with estimates of monthly mortgage payments, it allows you to think about your future in realistic terms based on your current employment and income situations, existing debt obligations, and the terms of the loan. You can easily compare options for mortgages by testing various combinations of interest rates, loan terms, and down payment amounts and isolating the most affordable option that best fits your situation.

Using a mortgage payment calculator prior to making any major housing decisions will allow you to mitigate unexpected costs and facilitate decisions for your unique financial situation and long-term goals.

What Impacts How Much Your Monthly Mortgage Payment is over Time?

There are several flexible elements that, without a homeowner's awareness, can significantly affect a mortgage borrower's payments and the overall planning strategy. As a mortgage gets older, the interest portion of each payment decreases, while the principal part increases. These changes illustrate the amortization of a loan.

For borrowers who made a down payment of less than 20% and pay PMI, as your equity reaches 20%, you can request the removal of PMI.

Property taxes could be altered by local governments in regular intervals. Depending on how local government agencies review the value of a property, your tax exposure could be greater or lesser based on adjustments, potentially increasing your monthly obligations including escrow amounts. Similarly, the cost of homeowner's insurance continues to historically inflate. In some cases, additional factors include a claims history summary, and house improvements — changing insurers and comparing your options can result in lower expenses.

If you reside in a community governed by a homeowner's association (HOA), your fees may vary based on the unknown rate at which they raise their cost to cover rising maintenance costs, satisfy their reserve fund or capital replacement plan, and make up front costs — potentially subject to any increase from a prior assessment.

Directly improving your net worth by making additional payments toward the principal (beyond the regular monthly stipulated amount) is one strategy allowing you to reduce the amount of interest expense; and if you go this route you can reduce potential loan terms as well.

When you refinance to maintain a tenable monthly amount, you can potentially lower either your rate, the length of your repayment term, or both. If you hold an adjustable-rate mortgage (ARM), the mortgage payment could either increase or decrease when the fixed-rate period ends, depending on interest rates and your loan agreement.

Lastly, for general costs, one may reclaim property taxes via homestead exemptions if the property is the homeowner's primary residence.

How You Can Reduce Your Monthly Mortgage Payment

For a homebuyer, increasing your down payment amount results in a smaller loan and monthly payment. Conversely, refinancing into a longer-term mortgage such as extending a remaining 20-year term on a 30-year mortgage back to 30 years can lower your monthly payment.

If you refinance at a lower rate depending on market conditions, your total loan cost could substantially decrease. Additionally, if you receive a windfall of cash, recasting your loan (applying the lump sum to your principal and recalculating monthly payments based on the lower balance) can reduce your monthly obligation without changing your interest rate or term.

Once you reach 20% equity in your home, you can request PMI cancellation to reduce your monthly payment. If you believe your property is over-assessed, you can challenge your tax assessment with local authorities, potentially reducing your property tax obligation and monthly escrow amount.

Comparing lenders for both purchases and refinances often results in more competitive loan terms. Making bi-weekly payments adds an extra payment per year, reducing your principal balance faster and shortening the loan term. Making additional principal payments saves you on interest paid over time.

Improving your credit score before applying for a mortgage or refinance can improve your chances for a better interest rate and loan term.

Amortization Schedule: Keep Track of Your Mortgage Payments

An amortization schedule consists of all your mortgage payments over the loan term. It shows how much of each payment goes to interest and the principal balance.

In the early years of your loan term, most of your monthly payments will go toward interest. As your loan nears maturity, more of your payment goes toward reducing the principal balance.