What's included in a mortgage payment
Most homeowners pay four things every month, often called PITI: principal (paying down the loan), interest, property taxes and homeowners insurance. If your down payment is under 20%, lenders usually add private mortgage insurance (PMI), and some homes also have HOA fees.
Principal & interest = Loan × r ÷ (1 − (1 + r)−n) where r = rate ÷ 12 and n = months
Example
A $400,000 home with 20% down ($80,000) and a 30-year loan at 6.5% has a principal and interest payment of about $2,023. Adding property tax at 1.1% of the home's value and $1,500 a year in insurance brings the full payment to about $2,514 a month. Over 30 years you'd pay roughly $408,000 in interest.
What is PMI and how do I avoid it?
PMI protects the lender when you put less than 20% down. It typically costs 0.3%–1.5% of the loan per year. On a conventional loan, you can ask to cancel it once you reach 20% equity, and it ends automatically at 22%.
How to lower your mortgage payment
- Compare lenders. Even a 0.25% lower rate can save thousands over the life of the loan.
- Put 20% down if you can, to skip PMI.
- Shop for insurance separately from your lender's suggestion.
- Consider a 15-year loan if you can afford a higher payment — rates are lower and you'll pay far less interest.
Property tax rates vary widely by state and county, from about 0.3% to over 2% a year. Check your county assessor's website for your area's rate.
Common questions
How much is the monthly payment on a $400,000 house?
With 20% down and a 30-year loan at 6.5%, principal and interest is about $2,023 a month. Including typical taxes and insurance, expect around $2,500. Enter your numbers above for an exact estimate.
Is a 15-year or 30-year mortgage better?
A 15-year loan has a higher monthly payment but a lower rate and much less total interest. A 30-year loan keeps payments lower and more flexible. Many people choose 30 years and pay extra when they can.
Does my mortgage payment include property taxes?
Usually, yes. Most lenders collect property taxes and insurance monthly through an escrow account and pay the bills for you.
What credit score do I need for a mortgage?
Conventional loans generally require at least 620, and FHA loans can go as low as 580 with 3.5% down. Higher scores get noticeably better rates.
More calculators
- How much house can I affordHome price that fits your income
- Refinance calculatorMonthly savings and break-even point
- Paycheck calculatorTake-home pay after taxes and 401(k)
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