How to calculate your monthly mortgage payment
Figuring out your mortgage payments doesn't need to be tricky. Our simple Mortgage Calculator makes it easy to work out the cost of buying your dream home. Just plug in the home price of the house you’d like to purchase, the down payment and how long you'll be paying the loan, and voilà—you'll get a clear picture of your monthly mortgage payments. We’ve also populated the interest rate based on current Citi rates, but feel free to adjust to see how lower and higher rates would impact your results.
If you’re looking to dive a little deeper, our monthly payment Mortgage Calculator even lets you factor in extras like property taxes and homeowners insurance. This gives you a more complete view of what your monthly costs will look like, so you can budget for your new home accordingly.
Mortgage Calculator terms explained
Buying a home comes with its own vocabulary, which can make the process even more daunting. Let’s break down some of the terms used in this calculator.
| Term | Definition | |
|---|---|---|
| Down payment | The out-of-pocket amount you pay upfront when you close on your home. Usually expressed as a percentage of the total purchase price. A larger down payment can secure a lower interest rate and reduces the amount you need to borrow. The bigger your down payment, the less you’ll pay every month in principal and interest. | |
| Loan term | Also known as the mortgage term, this is the amount of time you have to pay back the loan. Most loan terms are 15, 20 or 30 years. Shorter terms generally have higher monthly payments but lower total interest costs, while longer terms spread out the payments, making them lower but increasing the total amount of interest you’ll pay. | |
| Interest rate | The percentage of your loan amount that you'll pay to the lender as a fee for borrowing the money. Interest rates can be fixed, meaning they stay the same throughout the life of the loan, or adjustable, meaning they may change at specified times. | |
| Mortgage points | Also known as discount points, these are a form of prepaid interest you pay the lender at closing in exchange for a lower interest rate. One point equals 1% of your loan amount. Purchasing mortgage points can lower your monthly interest payments, saving you money over the life of your loan. |
How can a Mortgage Calculator help?
Whether you’re buying your first place or tweaking the terms of your current loan, a Mortgage Calculator will come in handy. Here are all the ways it can help:
- Figuring out monthly payments: It crunches the numbers to show you what you’d owe each month and help you decide if a house fits your budget without stretching it too thin.
- Planning your budget: Knowing your monthly mortgage payment makes it easier to map out your finances and keep everything else, from groceries to getaways, on budget.
- Shopping for the best deal: With a Mortgage Calculator, you can play around with different rates, terms and down payments to see which loan type suits you best.
- Understanding interest: It breaks down how much of your payment goes to interest versus the principal. This insight is super helpful, especially in the early years of a mortgage when interest can be a real doozy.
- Considering taxes and insurance: Our Mortgage Calculator also factors in things like property taxes and homeowners insurance to give you a more accurate view of what you’ll spend each month.
Your monthly mortgage payment breakdown
Let's break down your monthly mortgage payment so you'll know exactly where your money is going. This will help you see the full picture of your monthly expenses, making it easier to budget and plan for your future.
- Principal: This is the part of your payment that goes toward paying off the amount you borrowed to buy your home.
- Interest: This is the cost you pay the lender for borrowing the principal amount.
- Property taxes: Calculated based on your home’s value and location, this is paid to your local government for community services and infrastructure.
- Homeowners insurance: This covers potential damage to your home and protects your investment.
- Private Mortgage Insurance (PMI): If your down payment is less than 20%, PMI is usually required to protect the lender in case of default.
Deciding how much house you can afford
Knowing what you can comfortably afford is the cornerstone to a smooth home buying journey, but it’s all about striking a balance between your wish list and your financial reality. Aim for that sweet spot where you get most of what you want––three bedrooms, an outdoor patio and maybe a pool for those hot summer days––without overstretching financially.
This monthly Mortgage Calculator will show you how different down payments can impact your monthly budget. Plugging in different interest rates and loan terms can also reveal how sensitive your budget might be to changes in the financial environment.
How much of a down payment do you need?
Deciding on the size of your down payment is a crucial step in the home buying process. The amount you put down can significantly affect your monthly mortgage payments, the need for Private Mortgage Insurance (PMI) and even your interest rate. Here’s what you need to know to choose the down payment that works for you:
- Traditional 20% down payment: Often considered the standard, a 20% down payment can help you avoid paying PMI, a type of insurance that protects the lender if you default on your loan. It can also potentially qualify you for lower interest rates, reducing your total payment over the life of the loan.
- Lower down payments: Many loan programs, such as FHA loans, allow for down payments as low as 3.5%. These programs can make homeownership more accessible if you can't afford a larger down payment. However, they require you to pay PMI, which adds to your monthly costs.
- Zero down payments through a VA loan or USDA loan: Some programs, like VA loans (for veterans and active military) and USDA loans (for rural homebuyers) offer zero down payment options. These programs have specific qualifications and may include other types of fees.
How to lower your monthly mortgage payment
Are your initial calculations off the mark? No worries. There are plenty of ways to get to your magic number. You can extend your loan term from 20 to 30 years, which will spread out your payments and make each month more manageable.
You can also consider homes in areas with lower property taxes, which can really lighten your financial load. With strategies like these, you can make sure that your monthly payments give you enough financial freedom to enjoy your homeownership journey.
How to apply for a mortgage
So, you've locked in the numbers and have a ballpark figure of what you can afford—awesome! Now it's time to get serious about getting pre-approved for a mortgage. During this process, lenders will take a closer look at your financial background, including your income, debts and credit score, to determine how much money they're comfortable lending you. Getting pre-approved shows sellers that you're a serious buyer and gives you the confidence to make an offer when you find that perfect spot.