Mortgage Calculator | Free Monthly Payment & Affordability Tool
Calculate your monthly mortgage payment, find out how much house you can afford, and compare 15 vs 30 year terms.
What Makes Up Your Mortgage Payment?
A mortgage payment consists of four parts, often called PITI:
- Principal — The amount you borrowed
- Interest — The cost of borrowing (determined by your rate)
- Taxes — Annual property taxes (typically 1-2% of home value)
- Insurance — Homeowners insurance (protects against damage)
If your down payment is less than 20%, you'll also pay PMI (Private Mortgage Insurance). Understanding each component helps you accurately budget for homeownership and avoid surprises when you receive your monthly statement.
Real Example: $400K Home with 20% Down
| Component | Monthly Cost |
|---|---|
| Principal & Interest (6.5%, 30yr) | $2,022 |
| Property Taxes (1.2%/year) | $400 |
| Homeowners Insurance | $100 |
| Total Monthly Payment | $2,522 |
Required annual income (28% rule): $2,522 ÷ 0.28 × 12 = $108,000/year
The 28/36 Rule (Affordability Guide)
Lenders use the 28/36 Rule to determine how much you can borrow:
- 28% Front-End Ratio: Housing costs ≤ 28% of gross monthly income
- 36% Back-End Ratio: Total debt payments ≤ 36% of gross monthly income
| Annual Income | Monthly Income | Max Housing (28%) | Max Debt (36%) |
|---|---|---|---|
| $80,000 | $6,667 | $1,867 | $2,400 |
| $120,000 | $10,000 | $2,800 | $3,600 |
| $180,000 | $15,000 | $4,200 | $5,400 |
| $250,000 | $20,833 | $5,833 | $7,500 |
15-Year vs 30-Year Mortgage
This is one of the most important decisions you'll make. Let's compare a $320,000 loan (after 20% down on $400K home) at 6.5%:
30-Year Mortgage
Payment: $2,022/month
Total Interest: $408,000
Total Cost: $728,000
✓ Lower monthly payment
15-Year Mortgage
Payment: $2,788/month
Total Interest: $222,000
Total Cost: $542,000
✓ Saves $186K in interest!
The Sweet Spot: Make 30-year payments at a 15-year rate
Take a 30-year mortgage but make the 15-year payment. If you can't afford the 15-year payment every month, having the 30-year as a safety net gives you flexibility. In months when you can, pay extra.
Down Payment Strategies
| Down Payment | Amount ($400K Home) | PMI? | Monthly Payment |
|---|---|---|---|
| 5% | $20,000 | Yes | ~$2,850 (incl. PMI) |
| 10% | $40,000 | Yes | ~$2,700 (incl. PMI) |
| 20% | $80,000 | No | $2,522 |
| 30% | $120,000 | No | $2,207 |
Tips to Lower Your Mortgage Payment
- Increase your down payment: A 20% down payment eliminates PMI and lowers your loan amount.
- Improve your credit score: A 760+ credit score qualifies you for the best interest rates.
- Shop for rates: Compare offers from 3-5 lenders — even a 0.25% rate difference saves thousands over the loan term.
- Consider points: Paying discount points upfront lowers your interest rate if you plan to stay long-term.
- Choose a shorter term: If you can afford it, a 15-year mortgage saves significant interest.
Common Mortgage Mistakes
Mistake 1: Not Shopping Around for Rates
Getting quotes from 3-5 lenders can save you 0.25-0.5% on your rate — that's $15K-$30K over 30 years on a $400K loan. Many buyers accept the first rate they're offered without comparing.
Mistake 2: Ignoring Closing Costs
Closing costs typically run 2-5% of the home price. On a $400K home, that's $8K-$20K in additional upfront costs. Budget for these on top of your down payment.
Mistake 3: Maxing Out Your Pre-Approval
Just because a bank approves you for $500K doesn't mean you should spend that much. Stay below the 28% threshold for financial flexibility and to handle unexpected expenses.
Mistake 4: Forgetting About Maintenance
Budget 1-2% of home value annually for maintenance and repairs ($4K-$8K/year for a $400K home). New homeowners often underestimate this ongoing cost.
Mortgage Calculator Pros & Cons
Pros
- ✅ Instant PITI monthly payment breakdown
- ✅ 28/36 rule affordability calculator
- ✅ Free forever — no subscriptions
- ✅ Works offline after page load
- ✅ No sign-up or email required
Cons
- ✗ No Excel/CSV export option
- ✗ No dedicated mobile app
Frequently Asked Questions
How are mortgage payments calculated?
Monthly mortgage payment = Principal & Interest + Property Taxes + Homeowners Insurance + PMI (if applicable). P&I is calculated using the amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1]. Your total monthly payment is often called PITI (Principal, Interest, Taxes, Insurance).
How much house can I afford?
Use the 28/36 rule: housing costs shouldn't exceed 28% of gross monthly income, and total debt shouldn't exceed 36%. For a $120K annual income ($10K/month): max housing payment = $2,800, max total debt = $3,600. At 6.5% interest, this translates to roughly a $400K-$450K home with 20% down.
Should I choose a 15 or 30 year mortgage?
15-year: higher monthly payments but saves tens of thousands in interest. 30-year: lower monthly payments but costs more overall. For a $400K loan at 6.5%: 15-year = $3,485/month ($277K interest), 30-year = $2,528/month ($510K interest). Choose 15-year if you can afford the payments; choose 30-year for flexibility.
How does PMI work?
PMI (Private Mortgage Insurance) is required when your down payment is less than 20%. It typically costs 0.3-1.5% of the loan amount annually. On a $400K home with 5% down ($20K), PMI would add $95-$475/month to your payment. PMI can be removed once you reach 20% equity.
What is the mortgage payment formula?
The formula is M = P × [r(1+r)^n] ÷ [(1+r)^n − 1], where M = monthly payment, P = loan principal, r = monthly interest rate (annual rate ÷ 12), and n = total number of payments (years × 12). For example, a $300,000 loan at 6.5% for 30 years gives a monthly P&I payment of $1,896.
Should I pay mortgage discount points?
Discount points let you prepay interest to lower your rate. Each point costs 1% of the loan amount and typically reduces your rate by 0.25%. If you plan to stay in the home long enough to recoup the upfront cost (usually 4-7 years), points can save you money. Use the breakeven calculator: points cost ÷ monthly savings = months to recoup.
Reviewed by Shahid
Content Reviewer & Calculator SpecialistContent reviewer specializing in marketing, finance, health, and math calculators on GM Calculator.