Mortgage calculator

Principal and interest come from the loan amount, the rate and the term: on a loan of P at a monthly rate r (the yearly rate divided by 12) over n monthly payments, the payment is P × r(1 + r)ⁿ ÷ ((1 + r)ⁿ − 1). Mortgage insurance, a twelfth of the year’s property tax and insurance, and any HOA dues go on top. On a $320,000 loan at 6.5% for 30 years, principal and interest is $2,023/month.

Usually four things, often called PITI: principal, interest, property taxes and homeowner’s insurance, with the taxes and insurance collected into an escrow account that pays those bills. Mortgage insurance is added on a conventional loan with under 20% down and on FHA loans. HOA dues are usually paid to the association, not the lender, but they’re part of what the home costs each month.

Every extra dollar goes to the principal, so the balance falls faster and each later payment carries less interest. On a $320,000 loan at 6.5% for 30 years, an extra $200/month saves about $105,428 in interest and ends the loan 6 years and 7 months sooner. Most home loans today have no penalty for paying early, but check yours.

On a conventional loan, you can ask to cancel private mortgage insurance once you owe 80% of the home’s original value, and under the federal Homeowners Protection Act it ends on its own at 78%. FHA’s yearly premium stays for the life of the loan with under 10% down, and for 11 years with 10% or more. VA loans have no monthly mortgage insurance.

From the Census Bureau’s American Community Survey: each state’s median real estate taxes paid, divided by its median home value, gives the average effective rate. Nationally that’s 0.89% a year. The real bill depends on the local rate, how the home is assessed and any exemptions, like a homestead exemption, so the county’s figure for the home beats any average.

A 15-year loan costs more each month and far less overall. At the same 6.5% on $320,000, 30 years is $2,023/month and $408,142 in interest; 15 years is $2,788/month and $181,758. Lenders usually price 15-year loans a little lower, which widens the gap. A 30-year loan with extra payments keeps the smaller required payment while paying down faster.

FHA charges an upfront premium of 1.75% of the loan, usually added to it, and a yearly premium of 0.5% to 0.55% on most loans (0.7% to 0.75% on loans over $832,750). VA has no monthly mortgage insurance but charges a funding fee of 1.25% to 3.3%, by the down payment and whether it’s a first VA loan, usually added to the loan. Veterans paid for a service-connected disability are exempt.

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