Mortgage Calculator: How to Calculate Your Monthly Payment

What Goes Into a Monthly Mortgage Payment?

Your mortgage payment is typically made up of four components, often abbreviated as PITI:

Principal: The portion that reduces your loan balance. In the early years of a mortgage, very little of your payment goes toward principal. With a $400,000 loan at 7% over 30 years, only about $267 of your first payment reduces what you owe.

Interest: The cost of borrowing. At 7%, a $400,000 loan generates roughly $2,333 in interest charges in month one. Over 30 years, you will pay more in interest than you borrowed if you never refinance.

Property taxes: Most lenders collect these monthly in escrow. The national average is around 1% of assessed value per year, but rates vary wildly. New Jersey homeowners pay over 2%, while Hawaii pays under 0.3%.

Homeowner's insurance: Also collected in escrow. Budget $1,200 to $2,000 per year for a typical home, more in hurricane or wildfire zones.

PMI (Private Mortgage Insurance): Required if your down payment is under 20%. PMI typically costs 0.5% to 1.5% of the loan annually and cancels once your equity reaches 20%.

How Mortgage Rates Affect What You Pay

Even a half-point difference in your interest rate has a significant impact over 30 years. Here is what the monthly principal-and-interest payment looks like on a $350,000 loan at different rates:

6.0%: $2,098/month | 6.5%: $2,213/month | 7.0%: $2,329/month | 7.5%: $2,447/month

That $349 difference between 6% and 7.5% adds up to $125,640 over the life of the loan. This is why shopping at least three lenders and negotiating your rate is one of the highest-return financial moves you can make.

As of 2026, 30-year fixed mortgage rates are hovering in the 6.5% to 7.5% range depending on your credit score, down payment, and loan type. A score above 760 typically qualifies you for the best available rates.

30-Year vs. 15-Year Mortgage: Which Is Right for You?

The 30-year fixed is America's most popular mortgage for good reason. The lower monthly payment gives you flexibility, and the freed-up cash can be invested elsewhere. But the 15-year fixed comes with significant advantages too.

30-year pros: Lower monthly payment, more cash flow, easier to qualify. On a $350,000 loan at 7%, your monthly P&I is about $2,329.

15-year pros: Lower rate (typically 0.5% to 0.75% less), build equity faster, dramatically less total interest. The same $350,000 loan at 6.25% over 15 years costs about $3,002/month but you save over $230,000 in interest.

The right answer depends on your income stability, other financial goals, and how long you plan to stay in the home. Our mortgage calculator lets you compare both scenarios side by side.

How Much House Can You Actually Afford?

Lenders use two key ratios to determine how much they will lend you:

Front-end ratio (housing ratio): Your total housing payment should not exceed 28% of your gross monthly income. If you earn $8,000/month, your maximum PITI would be $2,240.

Back-end ratio (debt-to-income): All monthly debt payments combined should not exceed 43% of gross income for most conventional loans. This includes your mortgage, car payment, student loans, and credit card minimums.

These are lender limits, not necessarily what is wise for your budget. Many financial advisors suggest keeping housing below 25% of gross income so you have room to save, invest, and handle unexpected expenses.

The Real Cost of a Low Down Payment

Putting less than 20% down is tempting when home prices are high, but it carries real costs. PMI adds to your monthly payment until you reach 20% equity. On a $400,000 loan, PMI at 0.8% costs about $267/month, which is $3,204 per year for an insurance that protects the lender, not you.

Some loan programs let you avoid PMI with less down. VA loans (for veterans) require zero down and no PMI. FHA loans require just 3.5% down and carry their own mortgage insurance premium (MIP), though MIP now lasts the life of the loan for many borrowers. Conventional loans with at least 10% down and strong credit sometimes qualify for reduced PMI rates.

Use our calculator to model the difference in monthly payment between 5%, 10%, and 20% down payments, and decide which tradeoff fits your situation.

Frequently Asked Questions About Mortgages

What credit score do I need to get a mortgage?

Conventional loans typically require a minimum score of 620. FHA loans allow scores as low as 580 with a 3.5% down payment. For the best rates on a conventional loan, aim for 740 or above. VA loans have no minimum score requirement from the VA, though individual lenders often set their own floor.

What is an escrow account?

An escrow account is managed by your lender to collect and pay property taxes and homeowner's insurance on your behalf. Your lender collects one-twelfth of the annual amounts each month and pays the bills when they come due. Most conventional loans require escrow if your down payment was under 20%.

Can I pay off my mortgage early?

Yes. Making extra principal payments reduces your balance and the total interest you pay. Even one extra monthly payment per year can cut years off a 30-year mortgage. Check whether your loan has a prepayment penalty before doing this, though most modern mortgages do not.

How does the mortgage interest tax deduction work?

If you itemize deductions, you can deduct mortgage interest on loan balances up to $750,000 (for loans originated after December 15, 2017). With the 2026 standard deduction at roughly $15,000 for single filers and $30,000 for married filing jointly, many homeowners find itemizing only makes sense in the early years of a mortgage when interest charges are highest.

Calculate Your Mortgage Payment Now

Stop guessing and start planning. Our free mortgage calculator handles the full PITI breakdown, shows you how your balance amortizes over time, and lets you compare different loan scenarios instantly.

Try the Mortgage Calculator at FinanceToolz.com →

Know exactly what you can afford before you start house hunting.