Mortgage Calculator
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Scenario Comparison
Calculate a mortgage scenario before clicking the Add Scenario button
Glossary & Educational Content
- Principal: The original sum of money borrowed, or the remaining balance of the loan.
- Interest Rate: The annual percentage rate charged on the borrowed amount.
- Amortization: The process of gradually reducing a debt through regular payments that cover both principal and interest.
- PMI (Private Mortgage Insurance): Insurance that protects the lender if you default on the loan, typically required if your down payment is less than 20%.
- Down Payment: The portion of the home’s purchase price paid upfront, which reduces the amount you need to borrow.
- Refinance: Replacing an existing loan with a new one, often to secure a lower interest rate or better terms.
- Extra Payments: Additional amounts paid toward the principal that can reduce overall interest and shorten the loan term.
- Amortization Schedule: A detailed table showing each periodic payment, breaking down the amounts applied to interest and principal over the life of the loan.
- APR (Annual Percentage Rate): The total cost of borrowing money, expressed as a yearly rate. It includes the interest rate plus other fees (like lender fees, closing costs), so it's usually higher than your nominal interest rate.
- Escrow: An account managed by a third party (often your lender) where funds are held to pay for certain property-related expenses, typically property taxes and homeowners insurance. A portion of your monthly mortgage payment may go into an escrow account.
- Property Taxes: Taxes levied by local governments on the assessed value of a property. These are typically paid annually or semi-annually, and are often included in monthly mortgage payments through an escrow account.
- Closing Costs: Fees paid at the closing of a real estate transaction. These can include lender fees, appraisal fees, title insurance, and other expenses. These are separate from your down payment.
- Loan-to-Value (LTV): A ratio comparing the amount of your loan to the appraised value of the property. It's used by lenders to assess risk. A lower LTV (e.g., due to a larger down payment) often means better loan terms.
This calculator and glossary are provided for informational purposes only and are not a substitute for professional financial advice. Please consult a financial advisor for personalized guidance.
Frequently Asked Questions (FAQs)
How does my interest rate affect my monthly payment?
Your interest rate is a significant factor in your monthly payment. A higher interest rate generally means a higher monthly payment because more of your payment goes towards interest, especially in the early years of the loan. Conversely, a lower interest rate can reduce your monthly payment and the total interest paid over the life of the loan.
What is an amortization schedule?
An amortization schedule is a detailed table that breaks down each loan payment into its principal and interest components. It shows how much of each payment goes towards reducing the loan balance and how much is interest, month by month, over the entire loan term. Our calculator can generate and display an amortization schedule for your loan scenario, and you can even download it as a CSV file.
Does this calculator include property taxes or insurance (PITI)?
Yes, our calculator allows you to input annual property taxes and annual home insurance amounts. These are then broken down into monthly figures and included in the 'Total Payment' shown in the results and the amortization schedule. The 'Monthly Payment (P&I)' result refers only to Principal and Interest.
How can I lower my monthly mortgage payment?
There are several ways to potentially lower your monthly mortgage payment:
- Make a larger down payment: This reduces the total loan amount.
- Choose a longer loan term: Spreading payments over more years reduces the monthly amount, but you may pay more interest overall.
- Secure a lower interest rate: Shop around for the best rates or improve your credit score.
- Eliminate or reduce PMI: If you can make a down payment of 20% or more, you can avoid Private Mortgage Insurance.
What are 'extra payments'?
Extra payments are additional amounts you pay towards your mortgage principal beyond your regular monthly payment. Making extra payments can help you pay off your loan faster and save a significant amount of money on total interest paid over the life of the loan. Our calculator includes fields for optional extra monthly or yearly payments so you can see this impact.
Quick Mortgage Tips
1. Understand Your Budget
Before you start house hunting, get a clear picture of what you can comfortably afford. Consider not just the mortgage payment (principal, interest, taxes, and insurance - PITI), but also other homeownership costs like maintenance, repairs, and potential HOA fees. Use our calculator to experiment with different scenarios.
2. Improve Your Credit Score
A higher credit score generally qualifies you for lower interest rates, which can save you thousands of dollars over the life of your loan. Check your credit report for errors, pay your bills on time, and try to reduce existing debt before applying for a mortgage.
3. Shop Around for Lenders
Don't settle for the first mortgage offer you receive. Different lenders can offer varying rates and fees. Get quotes from multiple banks, credit unions, and mortgage brokers. Compare their loan estimates carefully to find the best deal for your situation.
4. Get Pre-Approved for a Mortgage
A mortgage pre-approval gives you a realistic idea of how much you can borrow and shows sellers that you're a serious buyer. It involves a lender reviewing your financial information. While it's not a final loan commitment, it's a crucial step in the home-buying process.