How to Use a Mortgage Calculator: A US Guide to Payments, PMI, Taxes and Points

A mortgage calculator tells you the monthly payment on a home loan, but the number that really matters is the total monthly housing cost and the total interest over the life of the loan. This guide explains what goes into a US mortgage payment, how to read the results and which inputs matter most. The figures below are illustrations using round numbers, not current market quotes.

What a mortgage payment includes: PITI

• Principal: repays the loan balance.
• Interest: the cost of borrowing, charged on the remaining balance.
• Taxes: local property tax, often paid monthly into an escrow account by your lender.
• Insurance: homeowners insurance, also usually escrowed. Flood insurance or an HOA fee may add to this.

The principal and interest part comes from the standard formula M = P × r × (1 + r)n ÷ ((1 + r)n − 1), where P is the loan, r the monthly rate and n the number of payments. The mortgage calculator adds taxes and insurance for you.

A worked example

Take a $400,000 home with 20% down, so a loan of $320,000.

A 15-year loan has a payment about $635 higher each month, but because it carries a lower rate and a much shorter life, it costs far less in interest. A one-point change in the rate on the 30-year loan is worth thousands of dollars a year: compare the first two rows.

Now add the rest. If property tax is 1.1% of the home value a year (about $367 a month) and insurance is $150 a month, the 30-year, 6.5% payment becomes about $2,539 a month, before any HOA dues. Lenders will use this total, not just principal and interest, to see whether you qualify.

Down payment and PMI

If you put down less than 20%, lenders usually require private mortgage insurance (PMI), which commonly costs somewhere between 0.3% and 1.5% of the loan per year depending on credit and down payment. On a $320,000 loan at 0.7%, that is about $187 a month. PMI on a conventional loan can be cancelled once your equity reaches 20%, and ends automatically at 22% under the schedule. FHA loans have their own insurance rules and different costs. A larger down payment lowers the loan, the payment and PMI, but should not drain your emergency fund.

Points and closing costs

Discount points are fees you pay at closing in exchange for a lower rate, with one point equal to 1% of the loan. Divide the cost of the points by the monthly saving to find the break-even in months. If a point costs $3,200 and lowers the payment by about $60 a month, the break-even is 53 months. Pay points only if you plan to keep the loan well beyond that. Closing costs typically run a few percent of the price and include lender fees, title insurance, appraisal and prepaid taxes and insurance.

How to read the amortization table

An amortization schedule shows how each payment is divided between interest and principal. In the early years of a 30-year loan, most of your payment is interest. On the 6.5% loan above, the first payment includes about $1,733 of interest and only $289 of principal. Extra principal payments, even small ones, shorten the loan and reduce interest. Confirm with your servicer that extra payments are applied to principal.

What lenders check

• Debt-to-income ratio (DTI): your monthly debts, including the new payment, divided by gross monthly income. Many conventional lenders prefer a back-end DTI under about 36% to 43%.
• Credit score: a higher score gets a better rate.
• Reserves and stable income: savings after closing and a steady job history.

A common budgeting guide is to keep total housing cost near 28% of gross income, and to treat that as a ceiling rather than a target.

Choosing between fixed and adjustable

A fixed rate keeps principal and interest unchanged for the life of the loan. An adjustable-rate mortgage starts with a lower rate for a set period, then resets according to an index, within caps. It can suit someone who will move or refinance before the reset, but carries the risk of a higher payment later.

Steps before you shop

1. Check your credit reports and fix errors.
2. Set a budget that includes taxes, insurance, maintenance and an emergency fund.
3. Get pre-approved by two or three lenders and compare the loan estimate forms, including fees.
4. Run each scenario in the calculator and keep the monthly cost comfortable.

This guide is educational and not financial advice. Rates, taxes and rules change, and mortgage terms vary by lender and location.

Frequently asked questions

What does a mortgage payment include?

Principal, interest, property taxes and homeowners insurance, called PITI, plus PMI or HOA dues where they apply.

How much down payment do I need?

20% avoids PMI on a conventional loan, but many loans allow much less, with PMI added.

Is a 15-year mortgage better than a 30-year?

It costs far less interest but has a higher payment. Choose based on what you can comfortably afford.

When can I cancel PMI?

On a conventional loan, when your equity reaches 20% you can request cancellation, and it ends automatically at 22%.

Are discount points worth it?

Only if you keep the loan beyond the break-even time, which is the cost of the points divided by the monthly saving.

What is a good DTI for a mortgage?

Many lenders look for 36% to 43% or lower, though programs vary.

Last reviewed 8 November 2026. Rates, limits and rules change, so confirm figures with the official source before you act.