- Principal & interest
- The part of the monthly payment that repays the loan: principal reduces the balance, interest pays the lender for the money still owed. On a fixed-rate mortgage this amount stays the same for the whole term, while the split shifts from mostly interest toward mostly principal. Taxes, insurance and HOA dues are added on top.
- Interest rate
- The annual note rate the lender charges on the unpaid balance. The calculator divides it by 12 and applies it monthly. It is not the APR, which also folds in lender fees and points. On a 30-year loan even a quarter-point change noticeably moves both the monthly payment and total interest.
- Loan term
- The number of years over which the mortgage is scheduled to be repaid, most commonly 30 or 15. A longer term lowers the monthly payment but keeps the balance outstanding longer, so total interest rises sharply. A shorter term means higher payments and far less interest over the life of the loan.
- Down payment
- The cash paid toward the purchase price at closing; the loan covers the rest. In this calculator the loan amount is the home price minus the down payment. On a conventional loan, putting down less than 20% usually adds PMI, and a larger down payment lowers the loan-to-value ratio, the payment and total interest.
- PITI
- Principal, interest, taxes and insurance: the four parts of a typical monthly housing payment. Lenders use PITI, plus HOA dues and mortgage insurance where they apply, to judge affordability. The monthly payment this calculator shows is the full figure, not just principal and interest, which is the number most online quotes lead with.
- Amortization
- The schedule by which equal monthly payments gradually pay off the loan. Early payments go mostly to interest because the balance is large; later payments go mostly to principal. Extra or one-time payments go straight to principal, which is why the calculator shows interest saved and an earlier payoff date when you add them.
- Loan-to-value (LTV)
- The loan amount divided by the home’s value or price, shown as a percentage. A $280,000 loan on a $350,000 home is 80% LTV. Lenders use LTV to set pricing and decide whether mortgage insurance is required; on conventional loans, PMI generally applies above 80% LTV.
- PMI
- Private mortgage insurance, charged on conventional loans when the down payment is under 20%. It protects the lender, not you. The calculator applies your PMI rate yearly to the loan amount and divides by 12. Under the Homeowners Protection Act you can request cancellation at 80% of original value, and it ends automatically at 78%.
- FHA mortgage insurance (MIP)
- The mortgage insurance premium on FHA loans, charged instead of PMI. It has two parts: an upfront premium of 1.75% of the base loan, usually financed, and an annual premium, 0.55% in the common case (HUD Mortgagee Letter 2023-05, effective March 20, 2023). The annual premium is divided into monthly installments.
- VA funding fee
- A one-time fee on VA loans, usually financed into the loan. For first use it is 2.15% with under 5% down, 1.5% with 5% to under 10% down, and 1.25% with 10% or more (VA, effective April 7, 2023); subsequent use costs more. Many veterans with a service-connected disability are exempt, which the calculator lets you select.