How the mortgage calculator works
Checked Oct 24, 2026
The monthly payment is principal and interest from the standard amortization formula, plus property tax, homeowners insurance, HOA dues and private mortgage insurance (PITI). The schedule then pays the loan down month by month, with any extra payments you add.
Step by step
1. Principal and interest
The loan is the home price less the down payment. The fixed monthly payment is the amount that pays it off over the term at the interest rate, compounded monthly. Each month’s interest is the balance times the rate over 12, and the rest of the payment lowers the balance.
2. Taxes, insurance and HOA
Property tax and insurance are yearly amounts split into 12 equal monthly payments, as an escrow account collects them. They stay flat over the loan.
3. PMI
With less than 20% down, PMI is charged each month at its yearly rate on the original loan amount. It drops off automatically once the balance reaches 78% of the home’s original price, as the Homeowners Protection Act requires.
4. Extra payments
Extra monthly, yearly and one-time payments go straight to principal in the month they are made, which shortens the loan and lowers the interest paid. The scheduled payment stays the same.
Figures used
- PMI required when the loan is above
- 80% of the price
- PMI drops off at
- 78% of the original price
Assumed
- The rate is fixed for the whole term.
- Property tax, insurance and HOA dues stay at today’s amounts.
- Payments are made on time every month.
Not modeled
- Adjustable-rate loans, interest-only periods and points.
- Closing costs, prepayment penalties and asking the lender to drop PMI early at 80%.
- FHA mortgage insurance, VA funding fees and USDA guarantee fees.
- The mortgage interest deduction.
Sources
These are estimates for education, not tax or investment advice. If a number looks wrong, report a problem with this calculation and say what you entered.