How to use the mortgage calculator
- Enter the home price and your down payment, as a percentage or an amount.
- Add the interest rate and choose the loan term.
- Optionally open Taxes, insurance & HOA to include those costs.
- Open the year-by-year breakdown to see how the balance falls over time.
How the monthly payment is calculated
The principal-and-interest part uses the standard fixed-rate formula M = P × r ÷ (1 − (1 + r)−n), where P is the loan amount, r is the monthly rate (annual rate ÷ 12) and n is the number of monthly payments.
Property tax and insurance are usually quoted per year, so they are divided by 12 and added on, along with any monthly HOA fee. The result is an estimate: lenders may also add mortgage insurance, escrow cushions or fees.
Why so much of the early payment is interest
Interest is charged on the balance you still owe. At the start that balance is large, so most of each payment goes to interest. As the balance shrinks, more of the same payment goes to principal. The breakdown table shows this shift year by year.
- A shorter term means higher payments but far less total interest.
- A larger down payment lowers both the payment and the interest, and often avoids mortgage insurance.
Examples
Loan of $280,000 → about $1,769.79 a month in principal and interest
About $2,439.10 a month, but roughly $198,000 less interest overall