Understanding mortgage payments
A mortgage payment isn't a single number — it's four stacked components: principal and interest (P&I), property tax, homeowner's insurance, and (if your down payment is under 20%) private mortgage insurance (PMI). Lenders call the bundle "PITI." This calculator shows each piece separately so you can see exactly where your money goes each month.
Most of the payment in the early years is interest, not principal. On a 30-year $300,000 loan at 7%, your first payment is about $1,750 interest and only $250 principal. That ratio flips around year 20. Extra payments — even $50/month — are applied directly to principal, so they accelerate the crossover dramatically. The extra-payment slider above shows your exact savings.
Frequently asked questions
How is my monthly mortgage payment calculated?
Your monthly payment combines principal and interest (P&I), property tax, homeowner's insurance, and — if your down payment is under 20% — private mortgage insurance (PMI). The P&I portion 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 payments. Taxes and insurance are simple annual amounts divided by 12.
How much house can I afford?
A common benchmark is the 28/36 rule: your total housing payment (P&I + tax + insurance) should be no more than 28% of your gross monthly income, and all debt payments combined should be under 36%. Lenders typically cap you at a 43% debt-to-income (DTI) ratio. Plug a house price into this calculator, see the total monthly payment, and compare against those thresholds.
When does PMI go away?
PMI automatically terminates once your loan-to-value (LTV) ratio reaches 78% based on the original amortization schedule. You can request cancellation earlier, at 80% LTV, once you've made enough principal payments or the home has appreciated. A new appraisal is typically required if you're claiming appreciation.
Does paying extra each month really help?
Yes — significantly. An extra $100/month on a 30-year $300,000 loan at 7% can save roughly $90,000 in interest and shave 5 years off the term. The earlier in the loan you start, the bigger the impact, because early payments are almost entirely interest. The extra-payment slider on this calculator shows the exact savings for your loan.
What's the difference between interest rate and APR?
The interest rate is what accrues on the loan balance. The APR (Annual Percentage Rate) folds in loan fees (origination, points, mortgage insurance if applicable) and expresses the total cost as a single annualized percentage. APR is always equal to or higher than the nominal rate and is the fairest number for comparing loan offers.