Mortgage Calculator

Home Price ($): Down Payment ($): Loan Term (years): Interest Rate (%): Property Taxes ($/year): Home Insurance ($/year): PMI Insurance (%): HOA Fee ($/month): Other Costs ($/month):

Mortgage Calculator Overview

The Mortgage Calculator helps estimate monthly payments and other financial costs associated with mortgages. It includes options for extra payments or annual percentage increases in common mortgage-related expenses. This calculator is primarily designed for use by U.S. residents.

What is a Mortgage?

A mortgage is a loan secured by real estate property. The lender provides funds to the buyer to purchase a home, and the buyer agrees to repay the loan over a set period, typically 15 or 30 years in the U.S. Monthly payments consist of two parts:

Principal: The original loan amount.
Interest: The cost of borrowing the money.

An escrow account may also be included to cover property taxes and insurance. The buyer only becomes the full owner of the property after the final payment is made. In the U.S., the most common mortgage is the 30-year fixed-rate loan, accounting for 70% to 90% of all mortgages.

Mortgage Calculator Components

The calculator uses the following key components:

Loan Amount: The total amount borrowed, calculated as the purchase price minus the down payment. Affordability is often tied to household income.
Down Payment: The upfront payment, usually a percentage of the purchase price. A 20% down payment is typical, but some loans allow as little as 3%. Down payments below 20% often require private mortgage insurance (PMI).
Loan Term: The repayment period, usually 15, 20, or 30 years. Shorter terms typically have lower interest rates.
Interest Rate: The cost of borrowing, expressed as a percentage. Fixed-rate mortgages (FRM) have consistent rates, while adjustable-rate mortgages (ARM) fluctuate based on market indices. The calculator focuses on fixed rates.

Costs Associated with Homeownership

Homeownership involves recurring and non-recurring costs:

Recurring Costs

Property Taxes: Annual taxes paid to local governments, averaging about 1.1% of the property value in the U.S.
Home Insurance: Protects against property damage and liability. Costs vary by location and coverage.
Private Mortgage Insurance (PMI): Required for down payments below 20%. Costs range from 0.3% to 1.9% of the loan amount annually.
HOA Fees: Fees for maintaining shared spaces in neighborhoods, typically less than 1% of the property value annually.
Other Costs: Includes utilities, maintenance, and repairs, often totaling 1% or more of the property value annually.

Non-Recurring Costs

Closing Costs: Fees paid at the end of a real estate transaction, including attorney fees, title services, and inspections. These can total around 10,000ona10,000ona400,000 home.
Initial Renovations: Optional costs for updating or repairing the property before moving in.
Miscellaneous: Includes moving costs, new furniture, and appliances.

Early Repayment and Extra Payments

Borrowers can save on interest and shorten the loan term by making extra payments. Common strategies include:

Extra Payments: Paying more than the monthly minimum reduces the principal faster, saving on interest.
Biweekly Payments: Paying half the monthly amount every two weeks results in 13 full payments per year.
Refinancing: Replacing the current loan with a shorter-term loan, often at a lower interest rate.

Advantages of Early Repayment

Lower interest costs.
Shorter repayment period.
Emotional satisfaction from being debt-free.

Drawbacks of Early Repayment

Prepayment penalties may apply.
Opportunity cost of not investing the extra money elsewhere.
Loss of tax deductions on mortgage interest.

Brief History of Mortgages in the U.S.

In the early 20th century, homebuyers needed a 50% down payment and faced short-term loans with balloon payments. The Great Depression caused widespread foreclosures. To address this, the U.S. government created the Federal Housing Administration (FHA) and Fannie Mae in the 1930s, introducing 30-year mortgages with lower down payments. These programs helped stabilize the housing market and supported homeownership during economic crises, including the 2008 financial crisis. Today, the FHA and Fannie Mae continue to play a vital role in the U.S. housing market.