How it works
A mortgage payment is more than the loan repayment. Lenders and budgets look at PITI: principal and interest, property taxes and insurance — plus private mortgage insurance (PMI) and homeowners-association (HOA) fees where they apply.
P&I = L × r ÷ (1 − (1 + r)−n) · L = price − down payment, r = rate ÷ 12, n = years × 12 monthly payment = P&I + price × tax% ÷ 12 + insurance ÷ 12 + PMI + HOAWorked example. A $400,000 home with 20% down ($80,000) borrows $320,000 at 6.5% for 30 years. Principal and interest are $2,022.62. Property tax at 1.2% a year adds 400,000 × 1.2% ÷ 12 = $400.00, and $1,500 a year of insurance adds $125.00. With 20% down there is no PMI, so the total is $2,547.62 a month. Over 30 years the interest alone comes to about $408,143.
When PMI applies
On US conventional loans, lenders usually require PMI when the down payment is under 20%. It typically costs about 0.3%–1.5% of the loan per year and, under the Homeowners Protection Act, must end automatically once the balance is scheduled to reach 78% of the original home value. The calculator adds PMI only while the down payment is below 20%. Saudi, Emirati and Egyptian mortgages do not use PMI — leave it at 0, and enter any life or property insurance the bank requires instead.
Ways to lower the payment
- Bigger down payment: reaching 20% removes PMI and shrinks the loan.
- Shorter term: a 15-year loan has higher payments but far less total interest.
- Rate shopping: on $320,000, each 0.25% lower rate saves roughly $50 a month over 30 years.
- Check taxes and insurance: they vary widely by area and can change every year.
Islamic home finance
Murabaha and ijara home finance in the Gulf quote a profit rate instead of interest, but a fixed monthly instalment follows the same arithmetic. Compare offers by the annual percentage rate (APR) that banks disclose, which includes fees.
See the full month-by-month schedule in the loan calculator, or work out a car payment with the car loan calculator.