Why this number is higher than the one you saw elsewhere
Most mortgage calculators return principal and interest only. That is the part of the payment that pays down the loan, and it is typically 70 to 80 per cent of what actually leaves your account each month. The rest is property tax, homeowner's insurance, mortgage insurance and, in many communities, HOA dues. Buyers who budget from a principal-and-interest figure routinely find themselves several hundred dollars a month short.
What goes into the payment
- Principal and interest — fixed for the life of a fixed-rate loan.
- Property tax — set as a percentage of assessed value and reassessed periodically, so it drifts upward over time. Rates vary enormously by county.
- Homeowner's insurance — collected monthly into escrow. Premiums have risen sharply in wildfire, hurricane and hail-exposed markets.
- Mortgage insurance — charged when you put down less than 20 per cent. It protects the lender, not you.
- HOA dues — paid directly to the association, not through escrow, but lenders count them against your debt-to-income ratio all the same.
How mortgage insurance falls away
On a conventional loan, PMI is not permanent. Under the Homeowners Protection Act your servicer must cancel it automatically once the loan balance reaches 78 per cent of the original purchase price on the scheduled amortisation, and you can request cancellation at 80 per cent. The calculator shows the month you cross that line on your current schedule, along with the total you will have paid in the meantime.
Two things speed this up. Paying extra principal moves the date earlier. And if your home has appreciated, you can request cancellation based on current value rather than purchase price, which usually means paying for an appraisal — often a few hundred dollars against a saving of thousands.
FHA loans work differently. Mortgage insurance premiums on most FHA loans originated since 2013 last the full term unless you put down 10 per cent or more, which is a common reason borrowers refinance into a conventional loan once they have equity.
Reading the equity chart
Amortisation is heavily front-loaded with interest. In the first years of a 30-year loan the great majority of each payment covers interest, and the balance barely moves. The crossover point, where more of your payment goes to principal than to interest, typically arrives somewhere between year 12 and year 18 depending on rate. This is why extra payments made early are worth so much more than the same money paid later.
Common questions
What is PITI?
PITI stands for principal, interest, taxes and insurance — the four components lenders count when they qualify you. Mortgage insurance and HOA dues are added on top where they apply, sometimes abbreviated PITIA. This calculator returns the full figure rather than principal and interest alone.
How much house can I afford?
Most lenders want your total housing payment under roughly 28 per cent of gross monthly income and all debt payments under 36 to 43 per cent, though programmes and compensating factors stretch these limits. Rather than working from those ratios in the abstract, try entering prices here until the monthly figure matches what you are comfortable paying.
Should I put down 20 per cent?
It avoids mortgage insurance and lowers the payment, but it is not automatically the right call. Draining your reserves to reach 20 per cent leaves you exposed the first time the roof needs work. Run the numbers both ways: a smaller down payment with PMI you can cancel in a few years is often the more resilient position.
Why did my payment go up after closing?
Almost always escrow. Your servicer collects taxes and insurance monthly and pays them annually. When either bill rises, or when the initial estimate was low, the servicer runs an escrow analysis and adjusts your payment to cover the shortfall plus the higher ongoing amount. Principal and interest on a fixed-rate loan do not change.
Are property taxes reassessed when I buy?
In many jurisdictions yes, and the new assessment is based on your purchase price rather than the seller's older, lower assessment. If you are estimating from the current owner's tax bill, you may be budgeting well under what you will actually owe. Check how your county handles reassessment on sale.