How is a mortgage payment calculated?

The principal & interest portion follows the standard amortization formula: payment = P × i ÷ (1 − (1+i)^−n), where P is the loan amount, i the monthly rate, and n the number of payments. Property tax, homeowners insurance, PMI, and HOA dues stack on top to form the full monthly cost.

What do extra mortgage payments actually do?

Every extra dollar goes straight to principal, which shrinks the balance interest is charged on for every remaining month. The payoff moves years earlier and total interest falls — and the return is guaranteed at exactly your mortgage rate, unlike investing the same money.

What is PMI and when does it go away?

Private mortgage insurance is typically required when the down payment is under 20%. It protects the lender, not you. It can be removed at your request around 20% equity and lenders must drop it automatically at 22%.

Why is most of my early payment interest?

Interest each month is the rate applied to the remaining balance — and the balance is biggest at the start. As the balance falls, the same fixed payment covers less interest and more principal, so the split flips over the life of the loan.

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Mortgage Calculator

The full monthly cost — principal & interest with taxes, insurance, PMI and HOA stacked on — plus the number lenders don't lead with: total interest over the life of the loan, and exactly what extra payments buy back.

Home price

Down payment

Interest rate

Loan term

yrs

Property tax (per year)

Home insurance (per year)

HOA (per month)

PMI (per month)

Extra payment (per month)

Total monthly payment

Principal & interest

Total interest

Payoff time

—

Year-by-year payoff schedule

Worth knowing: even with taxes and insurance in, this still isn't the full cost of owning — budget for maintenance (often ~1%/yr of the home's value) and one-time closing costs (typically 2–5% of the price) on top. PMI applies when the down payment is under 20% — if you leave the field at $0 this page estimates it at 0.6%/yr of the loan, and either way it drops PMI when the balance reaches 78% of the original value, the legal auto-termination point. You can often request removal earlier, around 20% equity — sooner still if the home has appreciated.

The two numbers that matter more than the payment

Every mortgage ad leads with the monthly payment, because it's the number that feels affordable. The two that actually describe the deal sit deeper: total interest — on a typical 30-year loan at recent rates, you pay back roughly double what you borrowed — and the payoff date, which decides how many of your working years the bank owns a slice of. This calculator surfaces both, and shows how sensitive they are to the inputs you control.

The amortization formula

P&I = loan × i ÷ (1 − (1 + i)^−n)

where i is the monthly rate (annual ÷ 12) and n the number of payments. Each month, interest = balance × i comes out first; the rest of the payment reduces the balance. That's why early payments are mostly interest — the balance is biggest at the start.

Extra payments: a guaranteed return at your rate

Add an extra amount to the inputs above and watch the green callout: every extra dollar skips the interest queue entirely and hits principal, which shrinks the balance interest is charged on for every remaining month. A few hundred a month routinely buys back 5+ years and six figures of interest.

The honest framing: paying down a 6.5% mortgage is a guaranteed 6.5% return. Investing the same money in the market might earn more — historically it often has — but "might" is the operative word, and only the payoff is certain. At a locked 3% the historical market case is strong; at 7%+ the certain return is competitive with the uncertain one. Which you prefer depends on how much you value certainty, not on arithmetic.

What the down payment buys

A bigger down payment shrinks the loan (and every payment after it), and crossing the 20% line removes PMI — a fee that protects the lender while you pay it. If you're just below 20%, the effective return on the last few thousand dollars of down payment is often the best of any dollar in the deal.

Common questions

15-year or 30-year?

The 15-year carries a lower rate and radically less total interest, but a much higher required payment. A middle path: take the 30-year for the required-payment flexibility, then pay it like a 15 with extra principal — you keep the option to drop back to the minimum in a tight year. You give up the 15's rate discount for that flexibility.

How much house can I afford?

A common guardrail is keeping total housing costs (this calculator's full monthly number, not just P&I) under ~28% of gross income. Lenders will often approve more — their ceiling is what you can carry, not what leaves room for the rest of your life.

Do extra payments lower my monthly payment?

No — the required payment stays fixed; extra principal shortens the end of the loan instead. (A "recast," where the lender re-amortizes after a large lump sum, is the exception — ask; it's often a small fee.)

Should I refinance instead?

If rates have dropped since you locked, maybe — the math is a break-even question: closing costs versus monthly savings. Our refinance calculator (linked below) computes the break-even month and the term-reset catch.

See the house inside your whole financial picture

Tesserae tracks the mortgage next to everything else — net worth with home equity, a debt payoff plan, and how the payment shapes your retirement date. Privacy-first: you enter your own numbers, and we never touch your bank login.

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