Last updated 23 August 2026
What makes up the payment
Principal and interest pay down the loan itself, using the standard amortising-loan formula. Property tax and home insurance are usually collected monthly and held in escrow by the lender, who pays the actual bills when due. PMI (Private Mortgage Insurance) applies when the down payment is below 20% of the home price, protecting the lender against default — it typically drops off once enough equity builds up.
Common questions
What is PMI and when do I need it?
Private Mortgage Insurance protects the lender, not you, and is typically required when the down payment is below 20% of the home price. This calculator estimates it at roughly 0.5% of the loan annually, a common ballpark — actual rates vary by lender and credit profile.
Why is my payment more than just principal and interest?
Most lenders collect property tax and homeowners insurance monthly along with the loan payment, holding it in escrow and paying the bills on your behalf when they're due. That's why the full monthly cost is usually higher than the loan payment alone.
Does a bigger down payment always help?
Generally yes — it lowers the loan amount, can eliminate PMI once it reaches 20%, and reduces total interest paid over the loan's life. It's a trade-off against keeping cash available for other things, which is a personal decision this calculator can't make for you.