Mortgage Calculator FAQ
Direct answers to the questions buyers actually ask. Each question is structured for featured-snippet eligibility in search engines.
What is the formula for a monthly mortgage payment?
For a fixed-rate loan the monthly payment (principal + interest) is: M = P × [ r(1+r)^n ] / [ (1+r)^n − 1 ], where P is the principal, r is the monthly interest rate (annual rate / 12 / 100), and n is the number of monthly payments (years × 12). Property tax, insurance, and PMI are added on top to get the full PITI payment.
What is PMI and how do I avoid it?
Private Mortgage Insurance (PMI) is required when your down payment is below 20% of the home value. The only way to avoid PMI entirely is to put down 20% or more, or to take a piggyback second loan (an 80-10-10 structure). You can request cancellation once your loan-to-value reaches 80%, and federal law requires lenders to drop it automatically at 78% LTV for most conventional loans.
How much house can I afford on a $80,000 salary?
Using the 28/36 rule, max monthly housing cost (PITI) is about 28% of gross monthly income. On $80,000/year that is roughly $1,867/month for PITI, which translates to a home in the ~$220,000–$280,000 range depending on rate, taxes, and down payment. Total debt payments should also stay under 36% of income ($2,400/month).
Is renting cheaper than buying?
It depends on the time horizon. Nationally the break-even point—owning long enough to recoup closing costs and principal paydown—is roughly 5 to 7 years. Under that horizon renting is usually cheaper in most US markets; above it, buying typically wins. Use the Rent vs Buy calculator with your specific numbers.
How does an amortization schedule work?
Each payment splits between interest (on the remaining balance) and principal. Early payments are interest-heavy because the balance is large. Over time the balance shrinks, so less of each payment is interest and more is principal. The total of the two never changes on a fixed-rate loan, but the split shifts each month.
How much does one extra mortgage payment a year save?
On a $350,000 30-year loan at 6.5%, one extra full payment per year (about $175 extra monthly) cuts roughly 5 years off the loan and saves about $85,000 in interest. The earlier you start, the larger the savings, since each dollar of principal removed compounds against you for fewer years.
What credit score do I need to buy a house?
Conventional loans typically require 620+; FHA loans accept scores as low as 580 (and sometimes 500 with 10% down); VA and USDA loans have no official minimum but lenders usually ask 580+. The rate you are offered improves sharply as your score moves from the 600s into the 700s.
What are closing costs?
Closing costs are fees paid at the close of a real estate transaction—typically 2% to 5% of the loan amount. They include lender origination, title insurance, appraisal, recording fees, and prepaid escrow for property tax and insurance. Plan for them on top of your down payment.