Mortgage Calculator

Amortization is the process of paying off your loan through fixed monthly payments over time. Each payment covers both interest (cost of borrowing) and principal (reducing the balance you owe). The split changes every month, early payments are mostly interest, while later payments shift toward principal.

The formula used is M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan principal, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (years × 12).

This calculator's Down Payment toggle subtracts your down payment from the home price before running the amortization formula, since the loan principal is what you actually borrow: home price minus down payment. On a $400,000 home, a 20% down payment ($80,000) leaves a $320,000 loan, which at 7% over 30 years comes to about $2,129/month. Turn the toggle off and the calculator treats the full $400,000 as the loan amount instead, which raises the payment to about $2,661/month, roughly $532 more.

The size of your down payment matters beyond the monthly payment. Conventional loans typically require private mortgage insurance (PMI), usually 0.5-1.5% of the loan annually, on any down payment below 20%. FHA loans allow as little as 3.5% down but charge mortgage insurance premiums for the life of the loan in most cases. VA loans allow qualifying veterans to put 0% down with no PMI at all. Use the toggle to compare scenarios: a smaller down payment gets you into a home sooner but increases both the loan balance and the ongoing insurance cost.

Discount points let you pay money upfront at closing in exchange for a lower interest rate. One point costs 1% of the loan amount and typically buys down the rate by around 0.25 percentage points, though the exact discount varies by lender. On a $320,000 loan, one point costs $3,200. To decide whether points are worth it, divide the point cost by your monthly payment savings to find the break-even month: if you plan to keep the loan longer than that, points usually pay off; if you expect to sell or refinance within a few years, they usually don't. When you shop points against rate quotes, compare the APR, not just the interest rate, since APR reflects points and lender fees.

Lenders also cap how much of your income can go toward debt, your debt-to-income (DTI) ratio. The front-end ratio compares your total monthly housing payment (principal, interest, taxes, insurance, and HOA dues) to your gross monthly income and is usually capped around 28%. The back-end ratio adds in every other debt payment, credit cards, car loans, student loans, and is typically capped between 36% and 43% depending on the loan program. A $400,000 home with a roughly $2,661 monthly payment needs about $9,500+ in gross monthly income to stay under a 28% front-end ratio.