Loan Details
Taxes & Insurance
Scenario 2 (Comparison)
Extra Payments
Pay off your mortgage faster and save on interest.
Impact of Extra Payments
Affordability Calculator
Based on a 36% debt-to-income ratio and current interest rates.
Visual Breakdown
Amortization Schedule
| Year | Interest | Principal | Balance |
|---|
Complete Mortgage Guide
Understanding your mortgage is the first step toward financial freedom. This calculator helps you visualize how interest rates, loan terms, and extra payments impact your long-term finances.
How Mortgage Payments Are Calculated
Your monthly mortgage payment is typically comprised of four main parts, often referred to as PITI:
- Principal: The money you borrowed to buy the home.
- Interest: The cost of borrowing that money.
- Taxes: Property taxes collected by your local government.
- Insurance: Homeowners insurance to protect against fire, theft, etc.
The formula used by lenders to calculate the monthly principal and interest payment is:
Where M is monthly payment, P is principal, i is monthly interest rate, and n is number of payments.
Types of Mortgages
Fixed-Rate Mortgage: The interest rate remains the same for the life of the loan (e.g., 30-year fixed). This provides stability as your principal and interest payment won't change.
Adjustable-Rate Mortgage (ARM): The interest rate is fixed for an initial period (e.g., 5 or 7 years) and then fluctuates based on market conditions. These often start with lower rates but carry risk.
FHA Loan: Backed by the Federal Housing Administration, these allow for lower down payments (as low as 3.5%) but require mortgage insurance premiums.
VA Loan: Available to veterans and active military, offering 0% down payment options and no PMI.
Strategies to Save Money
Paying off your mortgage early can save tens of thousands in interest. Use the "Extra Payments" tab above to see the impact of:
- Bi-weekly payments: Paying half your monthly payment every two weeks results in 13 full payments a year.
- Rounding up: Rounding your payment up to the nearest hundred dollars goes directly to principal.
- Recasting: If you make a large lump sum payment, you can ask your lender to "recast" the loan to lower monthly payments while keeping the same term.