Mortgage Calculator Guide
Our mortgage calculator allows home buyers to see how different inputs — purchase price, credit score, interest rate and down payment size — impact their total payment to help determine how much real estate they can comfortably afford.
When looking for a new home, keep in mind that mortgage rates change every day and vary from lender to lender, so use this loan calculator to get a ballpark estimate and then make sure to get quotes from multiple lenders. (We recommend one of Money’s best mortgage lenders of the year.)
Once you start actively looking for a home, make sure to get pre-approved, so you can move quickly once you find a home you want to bid for. Your starting mortgage balance will be the price you pay for the house minus your down payment.
How to calculate your mortgage payment
Three main factors determine your monthly mortgage payment: loan size, interest rate, and loan term. Your credit score and your home’s location will also affect your interest rate and, in turn, how much you pay.
Additional expenses such as homeowner’s association (HOA) fees, closing costs, property taxes and homeowners insurance should be factored in with your monthly housing expenses.
Formula to calculate your monthly mortgage payments
While our calculator takes the computing out of your hands, math whizzes can do it themselves with the following formula:
M = P*[(i/12*(1+i/12)n)]/[(1+i/12)n-1]
M – your monthly mortgage payment
P – the principal loan amount
i – the monthly interest rate, which should be divided by twelve (corresponding to the months of the year) since lenders give an annual rate
n – the number of payments over the life of the loan (number of years), or amortization schedule. For instance, for a 30-year mortgage, n would be 360 payments, (12 payments a year over 30 years, or 12*30).
What factors affect your mortgage payments
Putting 20% down lets you avoid paying for private mortgage insurance (PMI). More equity also gives you more financing options down the road, but the average down payment is about 6%, and it is possible to secure a home loan with a low down payment of as little as 3%.
With our calculator, you can enter the portion of the home’s cost you plan to pay upfront as either a percentage or a dollar value.
The interest on a mortgage is calculated monthly and is part of your annual percentage rate, or APR, which also includes the fees you have to pay the bank to borrow the money. Interest rates have remained at historic lows since 2020, when the Federal State Reserve decided to lower interest rates in response to the coronavirus pandemic.
Our calculator auto-populates with an average mortgage rate based on the information you enter but you can override this to see how rate changes could impact your costs.
Your location can impact your mortgage rate.
The most common mortgage is a 30-year fixed-rate conventional loan or fixed-rate mortgage loan, but some people opt for 15-year loans to pay off debt faster or an adjustable-rate mortgage loan to snag a lower rate. In most of the country, if your mortgage is larger than $510,400 you’ll need to take out a jumbo loan.
An estimation of your credit health. Credit scores range from Fair (580-669) to Good (670-739), Very Good (740-799), and Excellent (800 and above). Anything below 580 is considered a poor credit score.
How to lower your monthly mortgage payment
Struggling to pay your mortgage? There are many reasons why you might need to lower your monthly mortgage payments. Maybe you were over ambitious when buying your house, have other major financial goals, or are in a financial situation that’s taken a turn for the worse.
Whatever the reason, here are some methods for lowering your payments and making extra room in your budget.
Getting rid of PMI
Private mortgage insurance, also called PMI, is a type of insurance policy that protects lenders from borrowers defaulting on their mortgage. For conventional loans, a borrower’s down payment must exceed 20% of the home’s price to avoid PMI — government-backed mortgages, such as a VA or FHA loan, are exempt from this (if you are considering a VA loan, check out Money’s best VA loan lenders of the year).
Borrowers can call their lending institution to request they cancel PMI after reaching 20% in home equity. To achieve this, you can make extra payments regularly or a lump-sum payment toward the mortgage principal to reach that 20% sooner. You can also try reducing PMI by reappraising or remodeling your home.
Refinancing your mortgage means replacing an existing home loan by taking out a new one with your current lender or a different lender. This loan may have a better total interest rate and new terms that better fit your financial goals.
There are two main methods of lowering your monthly payments by refinancing. The first is by taking advantage of lower interest rates, which can be done right now, since rates are at all-time lows. The second is by extending the loan term, thereby stretching out your payments, but at the risk of being stuck with a larger debt for longer.
Buying mortgage points
Mortgage points could be a worthwhile solution to potentially high mortgage payments, since they can only be “bought” before taking on a home loan. When you buy mortgage points, you are essentially paying the lender to lower your interest rate, which will lower your monthly mortgage payments across the life of the loan.
Buying points isn’t the right option for everyone, but they are worth considering if you intend on keeping the property for a long time.
Selling and buying a more affordable home
Refinancing may not be enough to lower your monthly mortgage payment to an acceptable number. If the weight of your mortgage is simply too much to bear, consider selling your home and buying a more affordable one instead.
Keep in mind that this option should be reserved for a worst-case scenario in which your inability to make payments could put you at risk of defaulting on your loan. You’ll have to invest time, money and energy in the process of selling your current house, buying another one, and then moving to your new home.
Find out how much house you can afford
Understanding the limits of your budget is crucial before you engage with any lending institution. Doing so will help you remain realistic and avoid a risky purchase — even if it’s your dream home — that could backfire in the future.
To find out how much house you can afford, you’ll need to input your down payment amount, state, credit score, and preferred home loan type.
You’ll also need to indicate either your desired monthly payment amount or your gross monthly income and monthly debts. The latter two are used to determine your debt-to-income ratio, which plays a large role in whether you’ll qualify to borrow in the first place.
Most lenders and calculators evaluate affordability with the 28/36 rule, which establishes that your housing expenses and total debt should not be more than 28% and 36% of your total pre-tax income, respectively. To calculate this, multiply your monthly income by 28 or 36 and then divide it by 100.
For example, with a $4,500 monthly income, you should spend no more than $1,260 on monthly housing expenses. The formula to calculate this would be x = (a × 28) ÷ 100, where a is your monthly income (1,260 = [4,500 × 28] ÷ 100).