What is a home loan / mortgage?▼
A home loan (mortgage) is a secured loan used to purchase or refinance real estate. The property serves as collateral. The lender provides funds upfront; you repay principal plus interest over a set term (typically 15–30 years) through monthly payments.
How is my monthly mortgage payment calculated?▼
Your monthly Principal & Interest (P&I) is calculated using the amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ − 1], where P = loan amount, r = monthly interest rate (APR ÷ 12), and n = number of payments (years × 12). Add property tax, insurance, and HOA for the total monthly payment.
What is the difference between a fixed and adjustable-rate mortgage?▼
A fixed-rate mortgage has the same interest rate for the entire loan term, giving predictable payments. An adjustable-rate mortgage (ARM) starts with a lower fixed rate for a set period (e.g., 5 years), then adjusts periodically based on a market index. ARMs carry the risk of higher future payments.
How much down payment do I need?▼
The minimum depends on the loan type: Conventional loans can be as low as 3%, FHA loans require 3.5%, VA/USDA loans require 0% for eligible buyers. Putting down 20%+ eliminates PMI. A larger down payment also reduces your loan amount and total interest paid.
What is PMI and how can I avoid it?▼
Private Mortgage Insurance (PMI) protects the lender if you default. It's required when your down payment is less than 20% on a conventional loan. PMI typically costs 0.5%–1.5% of the loan amount annually. You can avoid it by putting down 20%, using a piggyback loan, or choosing a VA or USDA loan.
What is an amortization schedule?▼
An amortization schedule is a complete table of all your loan payments, showing how much of each payment goes toward principal and how much toward interest. Early payments are mostly interest; later payments are mostly principal. This calculator shows a year-by-year amortization summary.
What are closing costs and how much are they?▼
Closing costs are fees paid at the time of home purchase or refinance. They typically range from 2%–5% of the loan amount and include origination fees, appraisal fees, title insurance, attorney fees, prepaid taxes/insurance, and escrow setup. On a $400K loan, expect $8,000–$20,000 in closing costs.
What does PITI stand for?▼
PITI stands for Principal, Interest, Taxes, and Insurance — the four components of a typical monthly mortgage payment. Lenders use your total PITI payment (not just P&I) to calculate your housing debt-to-income ratio when approving your loan.
What credit score do I need for a home loan?▼
For a conventional loan, most lenders require a minimum score of 620, though 740+ gets you the best rates. FHA loans allow scores as low as 580 (with 3.5% down) or even 500 (with 10% down). VA loans have no official minimum but lenders typically require 620+.
Should I choose a 15-year or 30-year mortgage?▼
A 15-year mortgage has higher monthly payments but lower total interest — you'll pay roughly half the total interest of a 30-year loan. A 30-year mortgage has lower monthly payments, offering cash flow flexibility. Choose 15-year if you can comfortably afford the payment; choose 30-year if you prefer lower obligations or plan to invest the difference.
What is the debt-to-income (DTI) ratio lenders use?▼
DTI is your total monthly debt payments divided by gross monthly income. Lenders typically want a "front-end" DTI (housing only) below 28% and a "back-end" DTI (all debt) below 43%. Some loan programs allow up to 50% back-end DTI with strong compensating factors.
Can I pay off my mortgage early without penalty?▼
Most modern conventional mortgages in the US have no prepayment penalty. You can make extra principal payments at any time to reduce your balance and shorten your loan term. Always confirm with your lender and specify that extra payments should be applied to the principal, not future payments.
What does "refinancing a mortgage" mean?▼
Refinancing a mortgage means replacing your existing home loan with a new one — typically to get a lower interest rate, shorten or extend the term, switch from an ARM to a fixed rate, or convert home equity into cash (a cash-out refinance). The new loan pays off the old one, and you start making payments under the new terms. Refinancing involves new closing costs, so it only pays off if the savings exceed those costs within the time you plan to keep the loan.
How do I calculate whether refinancing my mortgage is worth it?▼
Run your current loan's remaining balance, a new (lower) rate, and a new term through this calculator to see the new monthly payment, then compare it to your current payment. Multiply the monthly savings by the number of months you plan to stay in the home; if that total exceeds your estimated closing costs (typically 2%–5% of the loan amount), refinancing is likely worth it. This calculator doesn't track a live market rate — enter whatever rate a lender quotes you to model your specific scenario.
How do refinance mortgage rates compare to purchase rates?▼
Refinance rates track the same overall market as new-purchase mortgage rates and move with the same broad factors (Federal Reserve policy, bond yields, inflation expectations), though a specific refinance offer can run slightly higher or lower than a purchase rate depending on the lender, your loan-to-value ratio, and whether it's a cash-out refinance (which typically carries a small rate premium). Because rates change daily, always get a current quote from a lender rather than relying on a rate you saw elsewhere, then plug that rate into this calculator to see your actual new payment.
Is this a simple mortgage calculator?▼
Yes — for a quick Principal & Interest payment, just enter the home price, down payment, rate, and term. It also works as a more complete calculator when you need it: add property tax, insurance, and HOA to see your full PITI payment, or model a refinance by entering a new rate and term against your current balance.