Mortgage Calculator

A mortgage is a loan used to purchase real estate, where the property itself serves as collateral. When you take out a mortgage, you agree to repay the principal (the amount borrowed) plus interest over a set term — typically 15 or 30 years. Understanding how these numbers work is one of the most financially important things you can do before buying a home.

Your monthly mortgage payment is made up of four components, often called PITI: Principal, Interest, Taxes, and Insurance. The principal and interest portion is fixed for the life of a fixed-rate mortgage, while taxes and insurance can change annually. In the early years of your mortgage, the vast majority of each payment goes toward interest rather than reducing your balance — a phenomenon called front-loaded amortization.

For example, on a $320,000 loan at 6.75% for 30 years, your first payment of approximately $2,076 will include roughly $1,800 in interest and only $276 in principal. By year 20, that same payment will be split closer to $1,200 interest and $876 principal. This is why making even small extra payments early in your mortgage can save tens of thousands of dollars in interest.

The down payment is equally critical. A 20% down payment eliminates the requirement for Private Mortgage Insurance (PMI), which typically costs 0.5%–1.5% of the loan amount annually. On a $400,000 home, that's $2,000–$6,000 per year in additional cost that disappears once you reach 20% equity.