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A mortgage calculator estimates your monthly mortgage payment based on the loan amount, interest rate, and loan term. It uses the standard amortization formula: M = P × [r(1+r)ⁿ] / [(1+r)ⁿ – 1], where P is the principal, r is the monthly interest rate, and n is the total number of payments. This calculator also generates a full amortization schedule showing how each payment splits between principal and interest over the life of the loan.
A monthly mortgage payment consists of principal (paying down the loan balance) and interest (the cost of borrowing). Many homeowners also pay property taxes, homeowners insurance, and private mortgage insurance (PMI) through escrow, often called PITI (Principal, Interest, Taxes, Insurance).
A common guideline is the 28/36 rule: your monthly housing costs should not exceed 28% of your gross monthly income, and total debt payments should not exceed 36%. For example, with a $6,000 monthly income, aim for a maximum housing payment of $1,680.
A 15-year mortgage has higher monthly payments but saves significantly on total interest (often 50%+ less). A 30-year mortgage has lower monthly payments, giving more cash flow flexibility. For investment properties, most investors choose 30-year terms to maximize monthly cash flow.