Question 1

How is a US mortgage payment calculated?

Accepted Answer

A US mortgage payment uses the amortization formula M = P[r(1+r)^n] / [(1+r)^n - 1], where P is the loan principal, r is the monthly interest rate (annual rate divided by 12), and n is the total number of monthly payments (years × 12). For a $300,000 loan at 6.5% for 30 years: monthly rate = 6.5%/12 = 0.542%, n = 360, and the monthly principal and interest payment is $1,896. Property tax, homeowners insurance, and PMI are added on top.

Question 2

What is PMI and when do I need it?

Accepted Answer

Private Mortgage Insurance (PMI) is required when your down payment is less than 20% of the home purchase price. It protects the lender if you default. PMI typically costs 0.5% to 1.5% of your loan amount annually, added to your monthly payment. Once you reach 20% equity, you can request PMI cancellation under the federal Homeowners Protection Act. With a 10% down payment on a $400,000 home, PMI might add $150–$400/month to your payment.

Question 3

What is the difference between a 15-year and 30-year mortgage?

Accepted Answer

A 30-year mortgage has lower monthly payments but costs significantly more in total interest. A 15-year mortgage has higher monthly payments but you build equity faster and pay roughly half the total interest. Example: on a $300,000 loan at 6.5%, the 30-year payment is $1,896/month with $382,000 in total interest; the 15-year payment is $2,613/month with $170,000 in total interest — saving over $212,000. Choose 30-year if cash flow matters; choose 15-year if you want to minimize total cost.

Question 4

How much house can I afford?

Accepted Answer

Most lenders use the 28/36 rule: your monthly mortgage payment (principal, interest, taxes, insurance) should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%. On a $80,000 annual salary ($6,667/month), the 28% limit allows roughly $1,867/month for housing. At a 6.5% rate for 30 years, that supports approximately a $295,000 loan. Your actual limit depends on credit score, debt-to-income ratio, and lender guidelines.

Question 5

Is this calculator free to use?

Accepted Answer

Yes, completely free with no registration required. All calculations run in your browser and we do not store your financial data.

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