Home Loan Calculator

A home loan calculator is a financial planning tool that estimates your monthly mortgage payment by calculating principal and interest based on loan amount, interest rate, and term length. Our calculator also factors in property taxes, homeowners insurance, PMI, and HOA fees to show your complete monthly housing cost (PITI payment).

EMI (Equated Monthly Installment) is calculated using the formula: EMI = P × r × (1 + r)^n / ((1 + r)^n - 1), where P is the principal loan amount, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the total number of monthly payments (loan term in years × 12). For example, a $300,000 loan at 6.5% for 30 years results in an EMI of approximately $1,896.

PMI (Private Mortgage Insurance) is insurance that protects the lender if you default on your loan. It's required when your down payment is less than 20% of the home's purchase price (LTV ratio above 80%). PMI typically costs between 0.3% to 1.5% of the original loan amount annually. Once you reach 20% equity through payments or home appreciation, you can request PMI removal.

While conventional loans allow down payments as low as 3-5%, putting down 20% is financially optimal because it eliminates PMI, reduces your monthly payment, lowers total interest paid, and often qualifies you for better interest rates. However, the right amount depends on your savings, monthly budget, and whether you want to preserve cash for emergencies or home improvements.

Your total monthly housing payment includes: (1) Principal - the amount that reduces your loan balance, (2) Interest - the cost of borrowing, (3) Property Tax - typically 0.5-2.5% of home value annually, (4) Homeowners Insurance - protects your property, (5) PMI - if down payment is under 20%, and (6) HOA fees - if applicable. This complete payment is called PITI (Principal, Interest, Taxes, Insurance).

Yes, making extra principal payments directly reduces your loan balance, which decreases the interest charged on future payments. For example, adding just $100 extra per month on a $300,000 loan at 6.5% for 30 years can save you approximately $48,000 in interest and pay off your loan 5 years earlier. Use our calculator's extra payment feature to see your specific savings.

A 15-year mortgage has higher monthly payments (typically 30-50% more) but significantly lower total interest cost and builds equity twice as fast. A 30-year mortgage offers lower monthly payments and more budget flexibility but costs substantially more in total interest. For example, a $300,000 loan at 6.5%: 15-year = $2,613/month ($170,340 total interest) vs 30-year = $1,896/month ($382,633 total interest).

Property tax is calculated as a percentage of your home's assessed value (typically 0.5% to 2.5% annually, varying by location) and is divided into 12 monthly payments. Most lenders require property tax to be included in your mortgage payment and held in an escrow account, from which they pay your tax bill when due. For a $400,000 home with 1.5% tax rate, you'd pay $500/month ($6,000/year) in property taxes.

Homeowners can deduct mortgage interest on loans up to $750,000 ($375,000 if married filing separately) and property taxes up to $10,000 (SALT cap) from their taxable income if they itemize deductions. These deductions are most valuable in the early years when interest payments are highest. For example, if you're in the 24% tax bracket and pay $20,000 in mortgage interest, you could save $4,800 in taxes annually.

To qualify for the best interest rates: (1) Improve your credit score to 740+ by paying bills on time and reducing credit utilization, (2) Make a larger down payment (20%+ shows lower risk), (3) Lower your debt-to-income ratio below 36%, (4) Shop with multiple lenders to compare offers, (5) Consider paying discount points (1 point = 1% of loan amount typically reduces rate by 0.25%), and (6) choose a shorter loan term if affordable.

LTV (Loan-to-Value) ratio is calculated by dividing your loan amount by the home's purchase price or appraised value, expressed as a percentage. For example, if you buy a $400,000 home with a $320,000 loan (after $80,000 down payment), your LTV is 80%. Lower LTV ratios (below 80%) typically qualify for better interest rates, eliminate PMI requirements, and indicate lower risk to lenders.

Refinancing makes sense when: (1) Current rates are at least 0.75-1% lower than your rate, (2) You plan to stay in the home long enough to recoup closing costs (typically 2-5 years), (3) You want to eliminate PMI after reaching 20% equity, (4) You need to change loan terms (switching from 30-year to 15-year), or (5) You want to tap home equity. Calculate your break-even point by dividing closing costs by monthly savings.