What this estimate includes
The Consumer Financial Protection Bureau describes a mortgage as an agreement that gives the lender the right to take the property if the borrowed money plus interest is not repaid. When you compare offers, the CFPB points to the loan size, the interest rate and points, closing costs, the APR, whether the rate is fixed or adjustable, the term, and features such as a prepayment penalty or a balloon payment.
The calculator above uses three of those inputs for a fixed rate: amount borrowed, nominal annual rate, and term. The payment it returns is principal and interest. It is the kind of payment the CFPB says lenders calculate so that, if you keep the loan for the full term and make every payment, the balance reaches zero at the end.
The payment you actually send is often larger. The CFPB puts it this way: principal plus interest, plus mortgage insurance if it applies, plus escrow for homeowners insurance and property taxes. A condo or homeowners association fee is usually paid separately. Escrow can change when taxes or insurance change. The principal and interest portion of a fixed-rate loan generally stays the same if you pay as agreed.
A worked example
Borrow $200,000.00 at 6% for 30 years. The contractual payment is $1,199.10. The same amount at the same rate for 15 years is $1,687.71. Both figures match the currency display of the standard payment formula, the one a spreadsheet returns from PMT when the monthly rate is 6% divided by 12 and the term is 360 or 180 months.
On the 30-year schedule the first month's interest is $1,000.00 and the principal portion is$199.10. The last month's interest is $5.97 and the principal portion is $1,194.17. The CFPB's explanation of paying down a mortgage is the same shape: early payments are mostly interest because the balance is still high, and later payments shift toward principal.
Paid exactly as scheduled, the 30-year example costs $231,677.04 of interest and$431,677.04 in total. The final row is $1,200.14, a dollar and four cents above the contractual payment, because each month's interest is rounded to the cent and the last payment clears whatever remains. The editorial policy states that rounding rule.
The CFPB uses a smaller illustration in its page on how lenders calculate payments: $100,000.00 for 30 years at 4% is described as $477 a month. This calculator's unrounded-to-the-dollar result for that case is$477.42.
The formula
Payment = P × r / (1 − (1 + r)−n)
P is the amount borrowed. r is the annual rate divided by 12, so 6% is 0.005 per month. n is the number of monthly payments. At a 0% rate the payment is simply P divided by n. Microsoft's PMT documentation describes the same inputs and notes that the result includes principal and interest but not taxes, reserve payments, or fees.
The rate field is the note rate, not the APR. The CFPB says the interest rate is the yearly cost of borrowing the money and does not reflect fees, while the APR also reflects points, broker fees, and other charges paid to get the loan. On a Loan Estimate the interest rate is on page 1 under Loan Terms, and the APR is on page 3 under Comparisons. Plug the note rate in here if you want principal and interest. Use the APR when you are comparing the broader cost of two offers, and be careful comparing a fixed-rate APR with an adjustable-rate APR.
Taxes, insurance, and mortgage insurance
Private mortgage insurance is a separate premium. The CFPB says it is typically required on a conventional loan when the down payment is less than 20% of the purchase price, that it protects the lender rather than the borrower, and that a monthly premium is added to the mortgage payment. This schedule does not estimate that premium, a government mortgage-insurance premium, or an escrow deposit.
How much a lender will let you borrow is also a different question from how much fits the rest of a household budget. The CFPB makes that distinction on its mortgage explainer and says insurance, taxes, and private mortgage insurance belong in the monthly figure you can comfortably pay. This page does not take income, debts, or a purchase price and turn them into an affordable home price.
Extra principal
On the $200,000, 6%, 30-year example, an extra $200.00 each month changes the payoff from360 months (30 years) to 252 months (21 years). Total interest falls from$231,677.04 to $151,876.18, a difference of$79,800.86. The extra payment in the model is optional. A 15-year note would require the higher payment instead. That comparison has its own page.
A prepayment penalty is a fee some lenders charge for paying off all or part of a mortgage early. The CFPB says not every mortgage has one, that it often applies when the whole balance is paid in the first three or five years, and that small extra principal payments do not normally trigger it. The note, not this calculator, decides.
What this page leaves out
- Adjustable-rate changes, balloon payments, and interest-only periods.
- Discount points, lender credits, and closing costs.
- Biweekly drafts, odd first-month interest, and a lender's own rounding.
- Whether a particular loan is available to a particular borrower.
The CFPB's fixed-versus-adjustable explanation is the right next read if the rate in a quote can move. A fixed rate is set when the loan is made and does not change. This schedule assumes that from the first row to the last.