# Mortgage Calculator – Investopedia

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Most people need a mortgage to finance a home purchase. Use our mortgage calculator to estimate your monthly house payment, including principal and interest, property taxes, and insurance. Try out different inputs for the home price, down payment, loan terms, and interest rate to see how your monthly payment would change.

**Mortgage Calculator Results Explained**

To use the mortgage calculator, enter a few details about the loan, including:

Monthly mortgage payments typically include four costs—principal, interest, taxes, and insurance, collectively known as PITI. Here's a closer look at each one:

If your condominium, co-op, or neighborhood has a homeowners’ association (HOA), you may also owe HOA dues. Though these fees aren’t usually part of a mortgage payment, some mortgage servicers will, upon request, include them in the escrow portion of the payment.

You can use our mortgage calculator to calculate your monthly payment (the easy way), or you can do it yourself if you're up for a little math. Here's the standard formula to calculate your monthly mortgage payment by hand. To figure out your monthly mortgage payment ("M"), plug in the principal ("P"), monthly interest rate ("i"), and number of months ("n") from your loan and solve:

$ M=[(1+i)_{n}−1]P[(1+i)_{n}] where:P=Principal loan amount (the amount you borrow)i=Monthly interest raten=Number of months required to repay the loan $

Lenders usually list interest rates as an annual amount. To determine the monthly rate, divide the annual amount by 12. So, if your rate is 6%, the monthly rate would be 0.06/12 = 0.005.

Interested in calculating just your mortgage interest? There's a formula for that, too. Here's a quick way to calculate one month of mortgage interest:

$ Monthly Interest=12Loan Balance×Interest Rate $

For example, say you have a $150,000 loan balance with a 5% interest rate. Your interest payment for the month would be:

$ 12($150,000×0.05) , or12$7,500 =$625.00 $

Remember that your balance changes each month after you make a mortgage payment. Be sure to use the new balance to calculate the next month’s interest.

The interest rate for fixed-rate mortgages remains the same for the entire loan term. With adjustable-rate mortgages (ARMs), the interest rate changes periodically based on prevailing interest rates.

Mortgage interest rates are influenced by various economic factors, including:

Here are the average monthly rates for 30-year fixed rate mortgages from 2010–2020, according to the Federal Reserve Bank of St. Louis:

*Image source: Federal Reserve Bank of St. Louis.*

Of course, the interest rate you see at the closing table could be higher or lower than the average rate. That's because your interest rate depends on what's happening in the economy at large—plus individual factors, such as your:

One of the key metrics lenders look at to determine how much house you can afford is your debt-to-income ratio (DTI)—the percentage of your gross monthly income that goes toward paying your monthly debt payments. A low DTI demonstrates that you have a good balance between debt and income, while a high DTI signals that your debt may be too high for your income.

In general, 43% is the highest DTI you can have and still qualify for a mortgage. Most lenders, however, prefer DTIs that are no higher than 36%, with housing expenses (including your mortgage payment) representing no more than 28% of that debt (the “28/36 rule“).

Another factor that determines how much house you can afford is the amount of money you have available to make a down payment and cover closing costs. Though a larger down payment might mean a bigger mortgage (and more house), make sure you'll have money left over to furnish the home and live in it.

Of course, just because a lender approves you for a loan doesn’t mean you have to borrow the entire amount. A smaller loan payment provides some wiggle room each month, which might come in handy in an emergency or if something unexpected comes up (say, a pandemic). A lower payment also makes it easier to save for other goals and work on your retirement nest egg.

It’s illegal for lenders to discriminate based on race, religion, sex, marital status, use of public assistance, national origin, disability, or age. If you believe a lender has discriminated against you, you can file a report with the Consumer Financial Protection Bureau and/or the U.S. Department of Housing and Urban Development (HUD).

A mortgage calculator can be an indispensable tool if you're considering financing a home purchase. That's because a good mortgage calculator:

If you’re like most people, a mortgage represents the largest long-term debt obligation you’ll ever have. Choosing the right mortgage can set you up for success and help minimize the overall costs of buying the home. Here are four tips to help you shop for the best mortgage:

**1. Determine how much you can afford**. A home is a large purchase, and you may wonder how much you can realistically afford. Try various scenarios on a mortgage calculator to find out what your optimal loan might look like. No matter how much loan you qualify for, keep in mind that you don't have to borrow the entire amount.

**2.** **Compare mortgage loan term lengths**. A 30-year fixed-rate mortgage is the most popular loan type, but it's not your only option. Use a mortgage calculator to see how various loan terms impact your monthly payment, the amount of interest you'll pay, and the total cost of the home. Remember, a longer loan term means lower monthly payments, but you'll end up paying more interest over the life of the loan. This chart compares how monthly payments and total interest differ for a fixed-rate $250,000 loan at 4%, depending on the loan term:

**3. Choose the right mortgage type**. A conventional loan isn’t the only type of mortgage out there, and choosing the right mortgage type might come down to your situation. For example, if you have a military connection, a VA loan might be a good option. Do you live in a rural or suburban area? A USDA loan could be a good fit. Borrowers with lower credit scores might benefit from FHA loans. And if you need a mortgage that’s larger than standard loan guidelines allow, a jumbo loan is your best bet.

**4. Shop around**. A mortgage is a substantial financial commitment, so now is not the time to go with the first available option. No matter which type of mortgage you’re in the market for, it pays to shop around. Remember that tiny differences in interest rates can lead to significant changes in your monthly payment and the total amount of interest you’ll pay. Be sure to try out different scenarios on a mortgage calculator to find your optimal loan. And of course, compare at least four lenders to find one that has the terms, choices, and services that work best for you.

International Insurance Institute. "Can I own a home without homeowners insurance?" Accessed Feb. 12, 2022.

Consumer Financial Protection Bureau. "What is private mortgage insurance?" Accessed Feb. 12, 2022.

Consumer Financial Protection Bureau. "Are condo/co-op fees or homeowners’ association dues included in my monthly mortgage payment?" Accessed Feb. 12, 2022.

Federal Reserve Bank of St. Louis. "30-Year Fixed Rate Mortgage Average in the United States." Accessed Feb. 12, 2022.

Consumer Financial Protection Bureau. "What is a Debt-to-Income Ratio? Why is the 43% Debt-to-Income Ratio Important?" Accessed Feb. 12, 2022.

FDIC. "Loans and Mortgages." Accessed Feb. 12, 2022.

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