Mortgage Calculator

A typical mortgage payment is often referred to as PITI, which stands for the four components that make up your monthly obligation:

• Principal: The portion that goes toward paying down your loan balance.
• Interest: The cost your lender charges for borrowing the money.
• Taxes: Property taxes assessed by your local government, typically collected monthly and held in escrow.
• Insurance: Homeowners insurance protects against damage and liability. If your down payment is less than 20%, you will also pay private mortgage insurance (PMI).

The loan term is the length of time you have to repay your mortgage. A shorter term means higher monthly payments but significantly less interest paid over the life of the loan.

With a 30-year fixed mortgage, your payments are spread over a longer period, keeping them more affordable each month. However, you pay much more in total interest.

A 15-year fixed mortgage will have noticeably higher monthly payments, but you will build equity faster and pay far less interest overall -- often saving tens of thousands of dollars.

A larger down payment reduces your loan amount, which lowers both your monthly payment and the total interest paid over the life of the loan.

Putting down at least 20% also eliminates the need for private mortgage insurance (PMI), which can save you hundreds of dollars per month. Even a few extra percentage points on your down payment can make a meaningful difference in your overall housing costs.

Private mortgage insurance (PMI) is required by lenders when your down payment is less than 20% of the home price. It protects the lender -- not you -- in case you default on the loan.

PMI typically costs between 0.3% and 1.5% of the original loan amount per year. To avoid PMI, you can make a down payment of 20% or more. If you already have PMI, you can request removal once your loan-to-value ratio reaches 80%, and your lender is required to automatically cancel it when you reach 78% LTV.

There are several strategies to reduce your monthly mortgage payment:

• Make a larger down payment to reduce your loan amount and potentially eliminate PMI.
• Choose a longer loan term (e.g., 30 years instead of 15) to spread payments over more time.
• Secure a better interest rate by improving your credit score, shopping multiple lenders, or waiting for favorable market conditions.
• Buy down your rate with points -- paying upfront to reduce your interest rate can lower your monthly payment over the life of the loan.

Closing costs are the fees and expenses you pay when finalizing your mortgage, typically ranging from 2% to 5% of the loan amount. They are paid on your closing day in addition to your down payment.

Common closing costs include:

• Loan origination fees
• Appraisal fee
• Title search and title insurance
• Attorney fees
• Recording fees
• Prepaid taxes and insurance (escrow)

Some lenders offer credits or no-closing-cost options, though these usually come with a slightly higher interest rate.