Mortgage Payment Calculator

Principal and interest use the standard amortized payment: P x r x (1 + r)^n / ((1 + r)^n - 1), where r is the annual rate divided by 12 and n is the number of months. The rest are simple divisions. Property tax is the price times the local rate, divided by 12. Insurance is the annual premium over 12. PMI is the loan balance times the PMI rate over 12, and is only charged while the down payment is under 20 percent.

What does PITI stand for?

Principal, interest, taxes and insurance - the four parts of a normal escrowed mortgage payment. Lenders underwrite against the full PITI figure, not against principal and interest alone, which is why a loan you can afford on paper can still be declined.

When does PMI stop?

By law, a lender must cancel PMI on a standard loan once the balance reaches 78 percent of the original value, and must honor a written request at 80 percent. Neither happens automatically in practice, so it is worth a calendar reminder - many people pay it for a year longer than they owe it.

Why is my escrow payment changing every year?

Because property tax assessments and insurance premiums change, and the escrow account has to hold enough to cover them. A shortfall is spread over the following twelve months on top of the new, higher amount, which is why the increase often looks larger than the tax rise that caused it.

Is 20 percent down actually necessary?

No. It avoids PMI and lowers the payment, but plenty of loans need 3 to 5 percent, and VA loans none. The real question is whether the PMI costs less than what the extra years of saving cost you in rising prices and rent, and at the moment that arithmetic usually favors buying sooner.