Part of our guide to How Much House Can You Actually Afford?
Most mortgage calculators return principal and interest and stop there. That figure is not what leaves your account each month, and the gap is large enough to change what you can afford.
Your full monthly payment — principal, interest, property tax, home insurance, HOA dues and PMI where it applies — plus the total interest over the life of the loan. Taxes and insurance are the parts buyers underestimate, and both continue rising after your principal and interest are fixed.
How the calculation works
The loan portion uses the standard amortised payment formula:
M = P · r / (1 − (1 + r)^−n)where P is the amount borrowed, r is the monthly rate (the annual rate divided by twelve), and n is the number of monthly payments. A 0% loan is handled separately, because that formula divides by zero — the payment is simply the principal divided by the term.
The remaining components are not part of the loan at all. Property tax and insurance are annual figures divided by twelve and collected into escrow alongside the payment. HOA dues are a flat monthly amount. PMI is applied only while the loan exceeds 80% of the purchase price, calculated as an annual rate against the loan balance and divided by twelve.
A worked example
A $400,000 home with $80,000 down, at 6.5% over 30 years, with $6,000 annual property tax and $1,800 annual insurance:
- The loan is $320,000 — exactly 80% loan-to-value, so no PMI
- Principal and interest is the largest component
- Property tax adds $500 a month; insurance adds $150
Those two escrow items add $650 to every payment. A calculator showing only principal and interest would understate the monthly cost by that amount — which over a year is enough to matter to most household budgets.
Drop the down payment to $20,000 and two things change: the loan rises to $380,000, and PMI appears because the loan-to-value is now 95%.
How to read the result
The monthly total is what to budget against, not the principal and interest figure.
Taxes and insurance rise over time. Your principal and interest are fixed on a fixed-rate loan; the escrow portion is not. A payment that fits comfortably today can drift upward for reasons unconnected to your mortgage.
PMI is temporary on a conventional loan. It is removable at 80% loan-to-value on request and terminates automatically at 78%. On most FHA loans it behaves very differently — see how much down payment you actually need.
Total interest is worth looking at once. Over thirty years it is frequently comparable to the amount borrowed. Seeing it is the strongest argument for a shorter term or extra payments, if you can afford either.
Important considerations
This estimates a payment. It does not tell you what you can afford, which is a different question with different inputs — see how much house can you actually afford.
Use the real property tax figure. It is public record for any specific address, and it varies enormously between jurisdictions. An estimate here is the single largest source of error in the result.
Get an actual insurance quote for the specific property rather than using a general figure.
The result excludes closing costs, maintenance, and utilities. Closing costs alone are a separate and substantial sum — see what closing costs actually pay for.
Related reading
- How much house can you actually afford?
- How much down payment do you actually need?
- Fixed vs adjustable rate mortgage
- What closing costs actually pay for
- Rent vs buy — the arithmetic behind the argument
This is an estimate for general information, not a loan offer or financial advice. Your lender's figures are the ones that count — see our disclaimer.
Frequently asked questions
Does this include taxes and insurance?
Yes. That is the point — principal and interest alone typically understate the real monthly cost substantially, because property tax and insurance are paid through the same monthly escrow.
What is PMI and why does it appear?
Private mortgage insurance, charged while the loan exceeds 80% of the home's value. It protects the lender, not you. The calculator shows it only when the loan-to-value is above 80%.
When does PMI stop?
On a conventional loan you may request cancellation at 80% loan-to-value, and the lender must terminate it automatically at 78%. So it is a temporary cost, not one for the full term.
Why is my lender's figure different?
Usually because of the tax and insurance estimates, which vary by property rather than by loan. Use the actual tax bill for the specific address — it is public record — instead of an average.
Does it account for extra payments?
Not yet. This calculates the scheduled payment. Extra payments reduce the term and total interest considerably, and that is a separate tool.
Sources
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