What is PMI and when do I need it?

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home price. It protects the lender if you default on the loan. PMI typically costs 0.5-1% of the loan amount annually.

How is the monthly mortgage payment calculated?

The formula used is: M = P × [r(1+r)^n] / [(1+r)^n - 1], where M is monthly payment, P is principal, r is monthly interest rate, and n is number of payments.

Mortgage Calculator - Calculate Your Monthly Payment

Home Price ($)

Down Payment ($)

Down Payment (%)

Loan Term (years)

Interest Rate (%)

Property Tax (/year)

Home Insurance (/year)

PMI Rate (%)

Applied if down payment < 20%

Disclaimer

Results are estimates for informational purposes only. Actual loan terms, rates, and payments may vary based on your credit score, income, and other factors. Please consult a licensed financial advisor or mortgage professional before making any financial decisions.

What is Mortgage Calculator?

A mortgage is a loan secured by real property: the lender holds a lien on the home until the loan is paid off. Monthly payments are structured as an amortizing loan — each payment covers the current month's interest on the outstanding balance and reduces the principal by the remainder. Early in the loan, most of each payment goes to interest; later, most goes to principal. This shift is mathematically precise, not arbitrary. The monthly payment on principal and interest (P&I) is calculated with the standard amortization formula: M = P × [r(1+r)^n] / [(1+r)^n − 1], where P is the loan principal (home price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (loan term in years × 12). For a $300,000 loan at 6.5% for 30 years: r = 0.065/12 ≈ 0.005417, n = 360, M = $300,000 × [0.005417 × (1.005417)^360] / [(1.005417)^360 − 1] ≈ $1,896/month for P&I. This calculator adds property tax and homeowner's insurance (and PMI when applicable) to arrive at your total monthly housing cost (PITI: Principal, Interest, Taxes, Insurance). These additional costs can add $300–$800+ to the base P&I payment depending on location and coverage.

How to Use

Enter the home price — the full purchase price, not what you plan to finance.
Enter your down payment as a dollar amount or percentage. Typing one updates the other automatically. A down payment below 20% typically triggers PMI.
Select loan term: 30 years is the most common and gives the lowest monthly payment; 15 years costs significantly more per month but saves tens of thousands in total interest.
Enter the annual interest rate — use the rate from your lender's pre-approval letter, or check current average rates from Freddie Mac's Primary Mortgage Market Survey (published weekly at freddiemac.com).
Enter annual property tax. A reasonable estimate is 1–1.5% of the home price per year, though it varies widely by state and county. Your county assessor's website has the actual rate.
Enter annual homeowner's insurance. The national average is approximately $1,200–$1,800 per year, according to the Insurance Information Institute (iii.org).
Click Calculate to see your full monthly breakdown, total interest paid, and year-by-year amortization schedule.

Why Use This Tool?

Shows full PITI breakdown (Principal + Interest + Taxes + Insurance) — the number that determines your debt-to-income ratio for lender qualification

Calculates total interest paid over the life of the loan — often $100,000–$200,000 on a typical 30-year mortgage, a number that motivates extra payments

Compares effective cost of different down payments, including when PMI is added

Year-by-year amortization schedule shows exactly when you reach 20% equity (PMI removal threshold)

All calculations run in your browser — no data is sent to any server

Tips & Best Practices

The 28/36 rule: most lenders want your PITI payment to be no more than 28% of gross monthly income, and all debt payments (PITI + car + student loans + credit cards) no more than 36%.
PMI removal: under the Homeowners Protection Act (12 U.S.C. § 4901), lenders must automatically cancel PMI when your loan balance reaches 78% of the original purchase price on conventional loans. You can request cancellation when you reach 80%.
Bi-weekly payments (half the monthly payment every two weeks) result in 26 half-payments = 13 full payments per year instead of 12. On a $300,000 / 6.5% / 30-year mortgage, this alone can save over $50,000 in interest and cut 4–5 years off the loan.
Refinancing rule of thumb: generally worth considering if you can lower your rate by at least 1 percentage point and plan to stay in the home long enough to recoup the closing costs (typically 2–3 years).
Property tax is deductible on federal Schedule A (Form 1040) if you itemize, subject to the $10,000 SALT cap. See IRS Publication 530 for homeownership tax details.

Frequently Asked Questions

What is the exact formula used to calculate my monthly payment?

Monthly P&I = P × [r(1+r)^n] / [(1+r)^n − 1]. P = loan principal (home price minus down payment). r = annual interest rate ÷ 12. n = loan term in years × 12. Example: $240,000 loan at 7.0% for 30 years → r = 0.07/12 = 0.005833, n = 360 → monthly P&I = $240,000 × [0.005833 × (1.005833)^360] / [(1.005833)^360 − 1] ≈ $1,597. This formula is the standard constant-payment amortization formula used by all mortgage lenders.

What is PMI and how is it calculated?

Private Mortgage Insurance (PMI) is required on conventional loans when the down payment is less than 20%. It protects the lender — not the borrower — against default. PMI typically costs 0.5%–1.5% of the original loan amount per year, divided into monthly installments. On a $280,000 loan with 0.8% PMI, the monthly PMI cost = $280,000 × 0.008 / 12 ≈ $187/month. Under the Homeowners Protection Act (12 U.S.C. § 4901), you have the right to request PMI cancellation when your loan balance reaches 80% of the original appraised value, and lenders must automatically cancel at 78%.

How much total interest will I pay on a typical mortgage?

On a $300,000 loan at 6.5% for 30 years: monthly P&I ≈ $1,896. Total of all 360 payments = $682,560. Total interest paid = $682,560 − $300,000 = $382,560 — more than the original loan. On a 15-year mortgage at the same rate: monthly P&I ≈ $2,614. Total interest = $170,520. The 15-year option saves over $212,000 in interest at the cost of $718/month more. This is why the loan term choice has such a large financial impact.

What does amortization mean?

Amortization is the process of paying off a loan through scheduled, equal payments that cover both interest and principal. In the early years, most of each payment is interest because the outstanding balance is high. For a $300,000 / 6.5% / 30-year mortgage, the first payment of $1,896 is split roughly: $1,625 interest / $271 principal. By payment 300 (year 25), the split is approximately $575 interest / $1,321 principal. The amortization schedule in this calculator shows this progression year by year.

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage typically offers a 0.5%–0.75% lower interest rate than a 30-year mortgage (as of 2024–2025). That rate reduction plus the shorter term results in dramatically less total interest. However, the monthly payment is 50–60% higher. Choose 15-year if: you can comfortably afford the higher payment, you prioritize paying off the home quickly, and the payment is well under 28% of gross income. Choose 30-year if: the 15-year payment would stretch your budget, you plan to invest the payment difference elsewhere, or you need flexibility for other financial goals.

What does this calculator not cover?

This calculator does not account for: closing costs (typically 2–5% of the loan amount); HOA fees (which can be significant in planned communities); the deductibility of mortgage interest on Schedule A (consult IRS Publication 530 or a tax professional); adjustable-rate mortgage (ARM) rate changes after the initial fixed period; or prepayment penalties. It also uses a fixed property tax and insurance estimate — your actual costs will vary. This tool is for estimating purposes only and does not constitute financial or mortgage advice.

Real-world Examples

Example walk-through: $420,000 home, 10% down, 30-year at 6.75%

Here is a complete calculation for a buyer purchasing a $420,000 home with 10% down ($42,000) at 6.75% interest for 30 years, with estimated property tax of $4,200/year (1% of home value) and insurance of $1,400/year.

Input

Inputs:
Home Price:        $420,000
Down Payment:      $42,000 (10%)
Loan Principal:    $378,000
Interest Rate:     6.75% annual
Loan Term:         30 years (360 payments)
Monthly Rate (r):  6.75% ÷ 12 = 0.5625%
Property Tax:      $4,200/year → $350/month
Home Insurance:    $1,400/year → $117/month
PMI Rate:          0.7% (estimated, down payment < 20%)

Output

Results:
P&I Formula:       M = $378,000 × [0.005625 × (1.005625)^360]
                       ÷ [(1.005625)^360 − 1]
Monthly P&I:       $2,452/month
Monthly PMI:       $378,000 × 0.007 ÷ 12 = $221/month
Monthly Tax:       $350/month
Monthly Insurance: $117/month
─────────────────────────────────────
Total Monthly PITI: $3,140/month

Total P&I payments: $2,452 × 360 = $882,720
Total Interest Paid: $882,720 − $378,000 = $504,720

PMI removed at 80% LTV:
  Balance reaches $336,000 (80% of $420,000) at ~year 8
  PMI savings after removal: $221/month

Data sources: Amortization formula: standard constant-payment formula used by CFPB (consumerfinance.gov). PMI rules: Homeowners Protection Act (12 U.S.C. § 4901). Property tax deduction: IRS Publication 530 (Tax Information for Homeowners). Mortgage rate benchmarks: Freddie Mac Primary Mortgage Market Survey (freddiemac.com). This calculator is maintained by Zhisan and last reviewed for accuracy in 2025.