Where $3,180 a month goes
Load sample fills the form with a $425,000 house, $42,500 down (10%), a 6.75% fixed rate over 30 years. Principal and interest come to $2,481. Rate ads quote this figure and stop there.
Your lender adds three more charges to the same payment and parks them in an escrow account until the bills come due:
- Property tax at 1.1% of the price, $390 a month.
- Homeowners insurance at $1,800 a year, $150 a month.
- Private mortgage insurance at 0.5% of the loan, $159 a month, because the down payment is under 20%.
The full bill lands at $3,180, 28% above the principal and interest figure. Budget from the full number. Only the principal part builds equity, and on payment one the principal share is $329.
Under 20% down: what PMI costs
Conventional lenders charge PMI whenever the loan is above 80% of the price. The table runs the sample house at four down payments. PMI rates here are typical figures for a strong credit score, and your quote depends on your own score.
| Down | Cash at signing | PMI rate | Monthly bill | PMI paid in total | Interest paid |
|---|---|---|---|---|---|
| 3% | $12,750 | 0.9% | $3,523 | $45,451 | $550,334 |
| 5% | $21,250 | 0.7% | $3,394 | $32,737 | $538,987 |
| 10% | $42,500 | 0.5% | $3,180 | $17,850 | $510,620 |
| 20% | $85,000 | None | $2,745 | $0 | $453,884 |
When PMI stops
Under the US Homeowners Protection Act, PMI on a conventional loan ends on its own once your scheduled balance reaches 78% of the original price. On the sample loan, the last PMI charge falls on payment 112, about 9 years 4 months in. You have the right to ask for cancellation earlier, at 80%, with a written request, a clean payment record, and proof the home has held its value.
FHA loans follow different rules. With less than 10% down, the FHA mortgage insurance premium lasts for the life of the loan, and a refinance is the only exit. This calculator models conventional PMI only.
Is 20% down worth waiting for?
Going from 10% to 20% down on the sample house takes $42,500 more cash at signing. The PMI you avoid totals $17,850 over 9 years 4 months. If the bigger down payment would empty your emergency fund, PMI is the cheaper risk. A furnace or a roof leak in year one costs more than a year of premiums.
15 years or 30 years on the same house
Lenders price 15-year loans below 30-year loans, often by half a point to three quarters of a point. The cards below use 6% for 15 years against 6.75% for 30, both on the $382,500 sample loan.
The 15-year payment runs $747 higher each month and saves $312,124 in interest. Those figures exclude escrow, which stays the same under either term.
A middle route: take the 30-year loan and send the $747 difference as extra principal. The loan then ends in 16 years 4 months with $249,514 of interest. You pay $51,019 more than the true 15-year loan because of the higher rate. In exchange, the required payment stays at $2,481, so a job loss or a lean month never puts you behind.
Discount points and the break-even month
A discount point costs 1% of the loan, $3,825 on the sample. Each point commonly buys around a quarter of a percentage point off the rate. Your Loan Estimate lists the exact trade from your lender.
- Rate after one point6.5%
- New principal and interest$2,418
- Monthly saving$63
- $3,825 รท $6361 months
The point pays for itself after 5 years 1 month. Sell the house or refinance before then and the point lost money. If you expect rates to fall and plan to refinance when they do, skip the points and keep the cash.
What $200 extra a month does
Type 200 in Extra principal on the sample loan. The loan ends in 24 years 2 months instead of 30 years, and total interest drops by $117,754. PMI falls off after payment 78 instead of 112, saving another $5,419.
Check two things before you start. Your servicer has to apply the money to principal, not hold the money as an early payment, so mark the transfer as principal-only in the payment portal. And pay off any card or loan above your mortgage rate first. A dollar against 24% card debt earns more than a dollar against a 6.75% mortgage.
Checking the payment against your income
Many lenders open with the 28/36 guideline. Housing costs stay at or under 28% of gross monthly income. All debt payments together stay at or under 36%.
The sample bill of $3,180 needs about $136,279 of household income before tax. At this income, car payments, student loans, and card minimums have to fit under $909 a month to pass the 36% test.
Conventional underwriting often approves total debt up to 45%, sometimes 50% with strong credit. Approval at 45% does not make 45% comfortable. Tax and insurance climb over time, and the guideline sets nothing aside for repairs, which commonly run about 1% of the home's value each year.
What this calculator leaves out
- Closing costs. Lender fees, title insurance, appraisal, and prepaid escrow usually run 2% to 5% of the loan, paid at signing. None of those appear in the monthly figure.
- Escrow stays flat. Servicers recalculate escrow every year, and the number tends to rise. Many counties reassess a home after a sale, so the seller's tax bill understates yours.
- Fixed rate only. An adjustable-rate mortgage resets after its intro period. The schedule here assumes one rate for the full term.
- One flat PMI rate. Real premiums depend on credit score and loan-to-value, and some lenders offer a single upfront premium or lender-paid PMI built into the rate instead.
- US lending terms. PMI, escrow, and the 78% rule come from US law. The payment formula holds anywhere a rate compounds monthly. Canadian fixed-rate mortgages compound twice a year, so payments there come out a little lower than this page shows.
- Cents. Servicers round each payment to the cent and adjust the final payment, so your lender's schedule ends a few dollars off from this one.