What goes into a mortgage payment
Lenders often talk about PITI — principal, interest, taxes and insurance. Many buyers pay two more items as well:
- Principal and interest — the loan repayment itself, fixed for the life of a fixed-rate mortgage.
- Property tax — set by your local government and usually collected monthly by the lender into an escrow account.
- Homeowners insurance — required by lenders and often also paid through escrow.
- PMI (private mortgage insurance) — usually required on a conventional loan when you put down less than 20%.
- HOA fees — charged by some condos and planned communities, normally paid directly to the association.
Worked example
A $400,000 home with 20% down ($80,000) leaves a $320,000 loan. At 6.5% over 30 years:
| Item | Per month |
|---|---|
| Principal & interest | $2,022.62 |
| Property tax ($4,400 / yr) | $366.67 |
| Insurance ($1,500 / yr) | $125.00 |
| Total | $2,514.28 |
Over 30 years you would pay about $408,142 in interest — more than the amount borrowed. In the first month, $1,733.33 of the $2,022.62 payment is interest and only $289.28 reduces the balance.
Down payment and PMI
Put down 10% on the same home instead and the loan grows to $360,000. Principal and interest rise to $2,275.44, and PMI at 0.5% a year adds $150 a month, for a total of about $2,917.11.
For conventional US loans, PMI must be cancelled automatically once your balance is scheduled to reach 78% of the home’s original value, and you can ask to remove it at 80%. In this example that happens after roughly 9 years (about 8 years if you ask at 80%), and PMI costs around $16,350 in total. Paying extra principal, or a rise in your home’s value confirmed by an appraisal, can get you there sooner. FHA loans use a different insurance (MIP) with its own rules. More in how to get rid of PMI.
How the loan term changes the cost
For a $320,000 loan (illustrative rates — shorter terms are usually offered at lower rates):
| Term & rate | Principal & interest | Total interest |
|---|---|---|
| 30 years at 6.5% | $2,022.62 | $408,142 |
| 20 years at 6.25% | $2,338.97 | $241,353 |
| 15 years at 5.75% | $2,657.31 | $158,316 |
We compare the options in detail in 15-year vs 30-year mortgage: which saves more?
How much house can you afford?
A common lender guideline is the 28/36 rule: keep your housing payment under 28% of your gross monthly income, and all debt payments combined under 36%. The $2,514.28 payment above works out to a gross income of about $8,980 a month (around $107,800 a year) under the 28% guideline. Lenders look at your full situation, so treat this as a starting point. The home affordability calculator works it out from your income and debts.
Frequently asked questions
Does this include closing costs?
No. Closing costs — lender fees, title insurance, appraisal and taxes — are paid upfront and often add 2–5% of the loan amount. Budget for them separately from your down payment.
How do I estimate property tax?
Look up the current tax bill on a listing or your county assessor’s website. Effective rates in the US vary from below 0.5% to over 2% of a home’s value a year, so a local figure is far better than a national average.
Does it work for adjustable-rate mortgages?
It shows the payment for the starting rate only. An ARM’s payment can change after the fixed period ends, so try a higher rate as well to see what a reset could cost.
Can I use it outside the United States?
Yes. The repayment math is the same for any fixed-rate home loan. Pick your currency, enter your local tax and insurance costs, and set PMI and HOA to 0 if they don’t apply.
Can I save my numbers and compare later?
Members can save any calculation — for example, one for each home you’re considering — and reopen it from their account. The calculator itself is free for everyone. See membership.
Results are estimates for educational purposes and are not financial advice. Rates, taxes and insurance vary — get a Loan Estimate from a lender before you decide. See our disclaimer.