Mortgage Calculator

Monthly mortgage payment (PITI) = Principal & Interest (P&I) + property Tax + homeowner Insurance + (PMI if applicable). P&I uses the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P is the loan amount, r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (12 × loan term in years). On a 30-year $300,000 loan at 6.5%: r = 0.065/12 = 0.005417; n = 360; M = $1,896. Add $300-500/month for typical property tax + insurance escrow.

A 15-year mortgage typically carries a lower interest rate (0.5-0.75% lower) and amortizes principal much faster, dramatically reducing total interest. Example: $300,000 at 6.5% over 30 years → $1,896/month, $382,627 total cost, $82,627 interest. Same loan at 5.85% over 15 years → $2,510/month, $451,754 total cost, $151,754 interest. So 15-year saves ~$69,000 over the life of the loan. The trade-off: 32% higher monthly payment commits more cash flow.

Two DTI ratios matter. FRONT-END DTI (housing only — PITI / gross monthly income) — conforming loans target ≤28%; FHA allows ≤31%. BACK-END DTI (all monthly debts including PITI, auto, student, credit card / gross income) — conforming targets ≤36%, FHA allows ≤43%, VA up to ~50% with compensating factors. Lower DTI = better mortgage rate and easier qualification. Most lenders use the higher of your two DTI ratios as the binding constraint.

Mortgage interest on up to $750,000 of acquisition debt is deductible if you itemize (IRC §163(h)(3) — TCJA permanent post-2017). Mortgages pre-Dec 15, 2017 keep the prior $1,000,000 cap. Property taxes are deductible as part of the SALT itemized deduction — capped at $40,000 ($20,000 MFS) for 2025 under OBBBA §70120, phasing down at 30% per dollar above $500,000 MAGI to a $10,000 floor. The /mortgage-interest-deduction-calculator/ models the tax savings; /itemized-vs-standard-deduction-calculator/ confirms whether itemizing makes sense.

Private Mortgage Insurance is required by lenders when your down payment is below 20% on a conventional loan. Typical cost: 0.5%-1.5% of the loan annually, added to your monthly payment. On a $300k loan at 1% PMI = $3,000/year = $250/month. By federal HPA (Homeowners Protection Act) law, lenders MUST automatically cancel PMI when your principal balance reaches 78% of the original home value (i.e., you've paid down to 78% LTV based on the original purchase price). You can REQUEST cancellation at 80% LTV using current value if values have risen substantially. FHA loans use MIP (Mortgage Insurance Premium) — same idea but doesn't auto-cancel for loans after 2013.

For 2025, the Federal Housing Finance Agency (FHFA) sets the conforming loan limit at $806,500 for one-unit properties in most US counties (the "general limit"). High-cost areas (Bay Area, NYC, DC, Hawaii) have a ceiling of $1,209,750 (150% of the general limit). Loans above the conforming limit are JUMBO loans — typically requiring higher down payment (20%+), higher credit scores (740+), and slightly higher rates. Conforming loans are eligible for purchase by Fannie Mae / Freddie Mac, which underwrites most of the US mortgage market. For 2026 the FHFA usually announces new limits in November.

CONVENTIONAL: not government-backed, requires 5-20% down (varies), 620+ credit, PMI if <20% down, conforming or jumbo. FHA: HUD-insured, 3.5% down with 580+ credit (or 10% down with 500-579), MIP for life of loan if <10% down, loan limits $524,225 - $1,209,750 (county-tied). VA: zero-down loan for veterans and active duty (subject to entitlement), no PMI/MIP, funding fee 1.4-3.6% rolled into loan, no loan limit since 2020 if full entitlement. USDA: rural areas, zero-down, income-restricted, 1% guarantee fee + 0.35% annual.

Each "discount point" costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $300k loan: 1 point = $3,000 upfront for a rate reduction from 6.5% to 6.25%. Break-even analysis: monthly savings ≈ $48 at 30 years → $3,000 / $48 = 62.5 months (5.2 years) to break even. Worth it if you'll keep the mortgage longer than break-even. NOT worth it if planning to refinance, sell, or relocate within 5 years. Points are tax-deductible as prepaid interest under §461(g) — fully deductible in year of purchase for purchase money loans; amortized over loan life for refis.

Extra payments accelerate principal payoff, saving compound interest. On a $300k 30yr 6.5%: $200/month extra principal saves $73,000 in total interest and pays off the loan 7 years early. Compare against: (a) the alternative return if invested (6.5% vs ~7-10% stock market expected); (b) liquidity needs (cash in mortgage can't easily be recovered); (c) tax treatment (mortgage interest deductible if itemizing). For low-rate (3-4%) pre-2022 mortgages, investing the extra cash usually wins. For high-rate (6.5%+) post-2022 mortgages, the math tilts toward extra principal — especially if not itemizing.

Refinancing replaces your existing mortgage with a new one — typically when rates drop, you want a different term, or to pull cash out. Refi closing costs are 2-5% of the loan ($6k-15k on a $300k loan), paid via cash at close OR rolled into the new loan balance. Break-even = closing costs / monthly payment savings. Cash-out refi tax: the extra principal taken out is NOT taxable (it's borrowed money), but interest on the cash-out portion is NOT deductible unless used to buy/build/improve the home. The /refinance-tax-impact-calculator/ models post-2017 interest deductibility.

Many loans (especially with <20% down) require an escrow account — the lender collects 1/12 of your annual property tax and home insurance with each mortgage payment, then pays the bills as they come due. Pros: forced budgeting, can't forget. Cons: lender holds your money interest-free; can be over-collected (RESPA allows up to 2 months cushion). You can usually request to "pay your own escrow" once LTV drops below 80% on conventional loans. FHA and VA loans typically REQUIRE escrow.

OBBBA §70202 created a temporary above-the-line interest deduction for NEW VEHICLE loans (2025-2028, up to $10,000/year interest). Not directly mortgage-related, but worth knowing if you're buying both a home and a car. Phase-out: AGI >$100k single / $200k MFJ. The OBBBA mortgage-related provisions are silent — the existing TCJA $750k acquisition debt cap remains permanent.