Mortgage calculator

What goes into a mortgage payment

A US mortgage payment is often called PITI: principal and interest on the loan, plus property tax and homeowners insurance, which the lender usually collects into escrow. Two more items are common: HOA dues for condos and planned communities, and PMI (private mortgage insurance) when you put down less than 20% on a conventional loan.

Worked example

A $400,000 home with 20% down ($80,000) leaves a $320,000 loan. At 6.5% for 30 years, principal and interest is $2,022.62 a month. Add property tax at 1.1% ($366.67) and $1,500 a year of insurance ($125), and the payment is about $2,514.

With only 10% down, the loan is $360,000, principal and interest rises to $2,275.44, and PMI at 0.5% adds $150 a month until you reach 20% equity.

Rules of thumb

Lenders commonly look for housing costs under about 28% of gross monthly income and total debt payments under about 36% (the "28/36 rule").

The loan amount is the price minus the down payment. Principal and interest use the standard annuity formula with the annual rate divided by 12 and the term in months. Property tax is the price times the tax rate divided by 12, insurance and HOA are added monthly, and PMI is the loan times the PMI rate divided by 12, charged only when the down payment is below 20%. The yearly table shows principal, interest and the remaining balance. Closing costs are not included.