How is a mortgage payment calculated?

A mortgage payment is calculated using the loan amount (home price minus down payment), interest rate, and loan term. The formula accounts for principal and interest (P&I), plus additional costs like property taxes, homeowners insurance, HOA fees, and PMI if applicable. The standard formula is: M = P[r(1+r)^n]/[(1+r)^n-1], where M is monthly payment, P is principal, r is monthly interest rate, and n is number of payments.

What is PMI and when is it required?

PMI (Private Mortgage Insurance) is insurance that protects the lender if you default on your loan. It's typically required when your down payment is less than 20% of the home price. PMI usually costs between 0.3% to 1.5% of the original loan amount annually and is added to your monthly payment. Once you reach 20% equity in your home, you can usually request to have PMI removed.

How much house can I afford?

Most financial experts recommend using the 28/36 rule: your housing costs should not exceed 28% of your gross monthly income, and your total debt payments should not exceed 36%. Use our affordability calculator to estimate your comfortable price range based on your income, existing debts, and down payment savings. Remember to factor in additional costs like property taxes, insurance, maintenance, and utilities.

What is included in a monthly mortgage payment?

A complete mortgage payment typically includes Principal and Interest (P&I), Property Taxes, Homeowners Insurance, HOA fees (if applicable), and PMI (if down payment is less than 20%). This is often abbreviated as PITI. Your actual monthly payment will vary based on your home price, location, down payment, and loan terms.

Should I choose a 15-year or 30-year mortgage?

A 15-year mortgage has higher monthly payments but significantly lower total interest costs and builds equity faster. A 30-year mortgage offers lower monthly payments and more flexibility in your budget. Choose 15 years if you can afford higher payments and want to save on interest. Choose 30 years if you need lower payments or want to invest the difference elsewhere. You can compare both options using our calculator.

How accurate is an online mortgage calculator?

Online mortgage calculators provide accurate estimates based on the information you enter. However, actual mortgage terms depend on factors like credit score, debt-to-income ratio, employment history, and current market rates. Use calculator results as a starting point, then consult with mortgage lenders to get personalized quotes and pre-approval for the most accurate numbers.

Home Affordability Calculator - Calculate Based on Income | 2026

Affordability

Calculate based on income and debts

Income & Debts

Annual Gross Income

$20,000$8,333/month$500,000

Monthly Debt Payments

$0Car loans, credit cards, student loans, etc.$5,000

Down Payment Saved

$0$500,000

Loan Parameters

Interest Rate

2.00%12.00%

Loan Term

10 years30 years

Property Tax Rate

0.00%3.00%

Insurance Rate

0.00%2.00%

Debt-to-Income Ratios

Front-end (Housing): 28.0%(Target: ≤28%)

Back-end (Total): 36.0%(Target: ≤36%)

Comfortable Price Range

$366,592

Based on 28% front-end ratio - recommended for financial comfort

Maximum Price Range

$388,259

Based on 36% back-end ratio - maximum lenders typically allow

Comfortable Payment

$2,333

Monthly

Maximum Payment

$2,500

Monthly

Comfortable Payment Breakdown

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Financial Summary

Monthly Income

$8,333

Monthly Debts

$500

Down Payment

$80,000

Available Income

$5,500