Mortgage Calculator

How Mortgage Payments Are Calculated

Your principal and interest payment is calculated using the standard amortization formula. In the early years, the majority of each payment goes to interest. Over time, an increasing portion goes to principal. A 30-year mortgage at 6.75% on a $320,000 loan means your first payment is roughly $2,075, of which about $1,800 is interest and only $275 reduces the balance.

Property Taxes and Insurance (PITI)

Lenders typically require that property taxes and homeowners insurance be paid through an escrow account. Each month you pay one-twelfth of the annual amount and the lender holds it until the bill is due. Property tax rates vary dramatically — New Jersey averages 2.2% while Hawaii averages 0.3%. Always verify the actual tax rate for the specific property before budgeting.

Frequently Asked Questions