Reviewed and verified by: David Chen, CFA
Use this tool to estimate your total monthly mortgage payment, including Principal & Interest (P&I) as well as optional Property Taxes and Home Insurance (PITI). Getting an accurate estimate is the first step toward smart homeownership planning.
Estimated Mortgage Calculator
Estimated Mortgage Calculator Formula:
Monthly P&I Payment (M)
$$ M = P \frac{r(1+r)^n}{(1+r)^n – 1} $$Total Monthly Payment (PITI)
$$ PITI = M + (T/12) + (I/12) $$Where:
- P = Loan Principal
- r = Monthly Interest Rate (Annual Rate / 1200)
- n = Total Number of Payments (Loan Term in Years × 12)
- T = Annual Property Tax
- I = Annual Home Insurance
Formula Source: Consumer Financial Protection Bureau, Investopedia
Variables: Understanding Your Inputs
- Loan Principal: The initial amount of money borrowed from the lender. This is the purchase price minus your down payment.
- Annual Interest Rate: The cost of borrowing money, expressed as a yearly percentage. This is the most sensitive variable in the calculation.
- Loan Term (Years): The number of years you have to repay the loan (commonly 15 or 30 years).
- Annual Property Tax (T): The yearly tax assessed by the local government based on the home’s value. Lenders often collect this monthly and hold it in escrow.
- Annual Home Insurance (I): The cost of the policy that protects the home from damage (e.g., fire, storm). This is also often escrowed.
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What is an Estimated Mortgage Calculator?
An Estimated Mortgage Calculator is a crucial online tool that helps prospective and current homeowners forecast their monthly housing costs. It takes key financial variables—the loan amount (Principal), the borrowing rate (Interest Rate), and the repayment period (Term)—to produce an estimate of the required monthly payment.
Crucially, a comprehensive calculator like this one moves beyond just the Principal and Interest (P&I) to estimate the total “PITI” payment: Principal, Interest, Property Taxes, and Home Insurance. Since taxes and insurance can significantly impact affordability, including them provides a much more realistic picture of the commitment.
Lenders use these types of calculations to determine a borrower’s maximum loan size. For the borrower, the calculator serves as an essential planning instrument, ensuring the monthly obligation fits comfortably within a household budget before making a formal application or property offer.
How to Calculate Estimated Mortgage Payment (Example)
- Gather Variables: Assume a $300,000 principal (P) at a 6.0% annual rate (R) over 30 years (N). Annual Tax (T) is $3,600 and Annual Insurance (I) is $1,800.
- Calculate Monthly Rate (r) and Payments (n): $$ r = 6.0\% / 12 \times 100 = 0.005 $$ $$ n = 30 \text{ years} \times 12 = 360 \text{ payments} $$
- Calculate P&I Payment (M): Plug the values into the P&I formula, which yields a payment of approximately $1,798.65.
- Calculate Monthly Tax and Insurance: $$ \text{Monthly Tax} = \$3,600 / 12 = \$300.00 $$ $$ \text{Monthly Insurance} = \$1,800 / 12 = \$150.00 $$
- Determine Total PITI: Sum all components: $$ \text{Total PITI} = \$1,798.65 + \$300.00 + \$150.00 = \$2,248.65 $$
Frequently Asked Questions (FAQ)
Is the estimated monthly payment fixed for the entire loan term?
The Principal and Interest (P&I) portion of a fixed-rate mortgage is fixed. However, the Property Tax and Home Insurance portions (the “TI” in PITI) can and often do increase over time, meaning your total escrowed monthly payment will change annually.
What is the difference between P&I and PITI?
P&I refers only to the repayment of the loan amount and the interest charged by the lender. PITI is the total monthly housing cost, including Principal, Interest, Property Tax, and mandatory Home Insurance (often including PMI if applicable, though not calculated here).
Does this calculator include Private Mortgage Insurance (PMI)?
This simplified calculator does not automatically include PMI. PMI is usually required if your down payment is less than 20% of the home’s value. For an accurate PITI, you should add your estimated monthly PMI cost to the result.
Can I calculate how much home I can afford using this tool?
While this tool tells you the payment for a given loan, to find out what you can afford, you should work backward based on your maximum comfortable monthly payment. A general rule is that your housing costs should not exceed 28% of your gross monthly income.