A mortgage is a loan used to purchase real estate, typically a home. Understanding how mortgage payments are calculated can help you make informed decisions about your home purchase.

How Mortgage Payments Are Calculated

Your monthly mortgage payment consists of four main components: principal, interest, taxes, and insurance (PITI). The calculator above focuses on principal and interest, which make up the core loan payment.

Key Factors Affecting Your Payment

Loan Amount: The total amount you borrow to purchase the home
Interest Rate: The annual percentage rate (APR) charged by the lender
Loan Term: The length of time to repay the loan (typically 15, 20, or 30 years)
Down Payment: The amount you pay upfront, which affects your loan amount

Benefits of a Larger Down Payment

Making a larger down payment can reduce your monthly payment, lower your interest costs, and potentially eliminate the need for private mortgage insurance (PMI).

Fixed vs. Adjustable Rate Mortgages

Fixed-rate mortgages maintain the same interest rate throughout the loan term, providing predictable payments. Adjustable-rate mortgages (ARMs) have rates that can change periodically, potentially offering lower initial rates but with payment uncertainty.

Mortgage Calculator