How this is worked out
The principal and interest portion uses the standard amortization formula. You borrow the price minus your down payment, and repay it in equal monthly instalments over the term:
M = P · r(1+r)ⁿ ÷ ((1+r)ⁿ − 1)
where P is the loan amount, r is the annual rate divided by twelve, and n is the number of months. Early payments are mostly interest because interest is charged on what you still owe; as the balance falls, more of each identical payment goes to principal.
Property tax and homeowners insurance are added as monthly twelfths, which is how an escrow account actually works. PMI is charged monthly on the outstanding balance and is removed from the calculation once you reach 20% equity — walking the schedule month by month is the only way to get that total right, because it falls away partway through.
A worked example
- Home price
- $400,000
- Down payment (20%)
- $80,000
- Loan amount
- $320,000
- Rate / term
- 6.5% over 30 years
- Principal & interest
- $2,022.62
- Property tax ($4,800/yr)
- $400.00
- Insurance ($1,800/yr)
- $150.00
- Total each month
- $2,572.62
The payment your lender quotes is not the payment you make
A lender quotes principal and interest. What leaves your account is PITI — principal, interest, taxes and insurance — and on many homes that is thirty to forty per cent more than the quoted figure. Add HOA dues on a condo and the gap widens again.
This is the single largest cause of people buying a house they cannot comfortably afford. The pre-approval number is built on a payment that excludes two large, unavoidable, permanently rising costs. Property tax in particular is reassessed and goes up; it is not fixed the way your rate is.
Enter your actual numbers above rather than leaving those fields at zero. A county tax rate is public information and takes two minutes to find, and the difference it makes to the monthly figure is usually several hundred dollars.
PMI, and when you can get rid of it
Private mortgage insurance protects the lender if you default. It protects you from nothing, and on a $320,000 loan at 0.5% it costs about $133 a month — roughly $1,600 a year for a service you receive no benefit from.
It is charged when your down payment is under 20%. Under the Homeowners Protection Act your servicer must cancel it automatically once the balance reaches 78% of the original value, and you can request cancellation at 80%. Many people pay it for years past the point they could have asked.
The calculator stops charging PMI once your equity reaches 20%, and tells you how long that takes and what it costs in total. That total is often the clearest argument for a larger down payment — or for paying a little extra each month, since reaching 20% sooner ends the charge sooner.
What an extra $200 a month actually does
On a $320,000 loan at 6.5% over thirty years, an extra $200 a month clears the mortgage roughly six years early and saves around $90,000 in interest. That is not a rounding difference; it is the price of a car, twice.
The mechanism is simple: every extra dollar goes straight to the principal, so it stops accruing interest for the entire remaining term. A dollar overpaid in year two avoids twenty-eight years of compounding. The same dollar in year twenty-five saves almost nothing, which is why early overpayments are worth so much more.
Try it in the extra payment field. The saving is shown against the total interest, and the schedule shortens in front of you.
Fifteen years or thirty
A fifteen-year mortgage carries a lower rate and vastly less total interest — often less than half. The payment is roughly forty per cent higher, which is what makes the decision difficult rather than obvious.
The honest way to compare is to run both here. A thirty-year loan with a voluntary overpayment gives you most of the interest saving with the flexibility to stop paying extra if your circumstances change; a fifteen-year loan gives a better rate but no flexibility at all. Which matters more depends on how stable your income is, not on which number is smaller.
Assumptions and sources
- Amortization formula
- Standard annuity formula, applied monthly. Verified in tools/test/finance.mjs against published amortization tables.
- PMI cancellation thresholds
- Homeowners Protection Act of 1998 — automatic termination at 78% of original value, borrower-requested cancellation at 80%. checked 2026-08
- Property tax
- You enter your own figure. Rates are set by county and vary from roughly 0.3% to over 2% of assessed value.
- PMI rate
- You enter your own figure. Typical range is 0.3%–1.5% per year depending on credit score and down payment.