Simple Mortgage Calculator to Estimate Monthly Mortgage Payment More Accurately

Last Updated on August 29, 2024 by Luke Feldbrugge

The Homes for Heroes mortgage calculator is a helpful tool that allows you to estimate monthly mortgage payments. It will help you understand and plan for your ongoing financial commitment if you choose to purchase a home. This mortgage payment calculator not only provides you a monthly mortgage payment estimate, but it also breaks out estimates for your principal and interest, property tax and insurance (PITI) for four different loan types. Try it out yourself below, and read on for more information about estimating your monthly mortgage payment.

Table of Contents

• Mortgage Payment Calculator – Determine Mortgage Payment Estimate
• Principal, Interest, Taxes, and Insurance (PITI)
• Types of Mortgage Loans
• Influence of Down Payments on Monthly Mortgage Payments
• Credit Score and Its Impact on Mortgages
• Homeowners Association HOA Fees
• Savings and Benefits through Homes for Heroes

Key Takeaways

• The Homes for Heroes mortgage calculator provides an essential tool for estimating monthly payments, breaking down costs into principal, interest, taxes, and insurance (PITI) for various loan types.
• Key variables such as loan type, credit score, and down payment significantly affect your mortgage’s interest rate and overall cost.
• Different mortgage loans such as FHA, VA, and USDA, cater to specific needs and financial situations. It’s good to understand the advantages and limitations of each to choose the best option for you.
• A larger down payment can reduce your loan-to-value ratio, lower your monthly payments, potentially eliminate private mortgage insurance (PMI), and improve your bidding position in competitive markets.
• A higher credit score typically secures lower interest rates, reducing the total cost over the life of the mortgage. Taking steps to improve your credit score can lead to significant long-term savings.
• Mortgage insurance is a critical component of your monthly mortgage payments. Understanding how these insurances are calculated and their impact on your mortgage can help you manage costs effectively.
• Homes for Heroes offers substantial savings for firefighters, EMS, law enforcement, military active duty and veterans, healthcare professionals and teachers; including an average savings of $3,000 after closing on a home with their specialists. Sign up today and a member of our team will contact you to best learn how we can assist you.

Mortgage Payment Calculator

Be sure to click the “Calculate” button at the bottom of the mortgage loan calculator. Use your results to estimate a home price that fits your budget.

If you would like to learn more about the factors used to build your monthly mortgage payment estimate, continue reading the content under your results.

PITI Explained: Principal, Interest, Taxes and Insurance

There are four main amounts included in our home mortgage calculator that make up the estimated monthly mortgage payment: Principal, Interest Rate, Property Tax and Insurance. You may hear mortgage lenders refer to this as “PITI.” Let’s take a look at each and how it can impact your mortgage payment.

Mortgage Payment Calculator Principal Value

The “P” in PITI refers to the principal of your home loan and it is typically the largest dollar amount that the mortgage calculator will estimate. Principal refers to the amount of money you originally said you would pay back on your home loan. The principal is not necessarily the price of the home. In fact, the principal of your home loan is rarely the price of your home. The principal of your home loan equals the purchase price minus the down payment and any fees you choose to roll into your home loan. Generally speaking, if you purchase a home for $300,000, put down a $12,000 down payment, and get a home loan for the rest of the payment, the principal of your home loan is $288,000.

Reducing the principal of your home loan will reduce your monthly mortgage payments.

There are two ways to reduce your principal on a new mortgage:

1. Purchase a less expensive house
2. Put a larger down payment on your home loan

That said, you can always pay more than your monthly principal amount to pay off your loan faster. Most loans do not penalize you for paying off faster, but some may, so make sure to read your terms carefully. You can also save on interest payments by paying your principal off faster because you will ultimately pay less in interest over the life of your loan. We do not include a targeted time period for paying off your mortgage in our mortgage calculator, but we wanted to let you know the options of how to pay off your mortgage faster.

Mortgage Payment Calculator Interest Rate Value

The first “I” in PITI is interest. Interest is the cost of borrowing the principal on your home loan. The interest you pay is based on an “interest rate.” The United States Federal Reserve dictates the baseline for home loan interest rates. Lenders use the Fed’s interest rate information as a baseline to calculate a home buyer’s home loan interest rate. However, the loan type, your credit score and credit history, and the down payment amount offered on the mortgage are important factors in determining your interest rate.

For example, FHA loans typically have a higher interest rate versus conventional loans. But, it’s easier to qualify for an FHA loan. Generally speaking, the higher your credit score the lower your interest rate. The more you put down as a down payment will typically lower your interest rate as well.

Lenders look at these factors because each loan a lender approves comes with risk. The risk is a borrower may not pay back the loan. For example, home buyers who receive a conventional loan with a higher credit score and a large down payment provide lenders with more confidence. This homebuyer often receives a lower interest rate.

You can always get an interest rate estimate online. You can also enter the interest rate estimate into the Homes for Heroes mortgage calculator. It is worth knowing interest rates can vary from lender to lender. The most accurate interest rate estimate will come directly from the lender you choose to do your home loan pre-approval.

Homes for Heroes mortgage specialists provide competitive mortgage rates AND they will save an average of $500 on lending fees. Simply register online with Homes for Heroes to speak with a member of our team. They will contact you to determine how to best serve your needs, and when you’re ready, assign you to our local mortgage specialist in your area.

There are three main actions you can take to reduce your interest rate:

1. Shop and Compare – Shop different mortgage lenders and compare interest rates. Just as you would shop for the best price on anything else, a home loan is no different. Check out different lenders and compare interest rates to get the best price.
2. Increase Down Payment – If there is room in your budget, making a larger down payment on your home loan can reduce your monthly mortgage payments by reducing the principal of your home loan, but it may also reduce the interest rate you receive on your home loan.
3. Improve Credit Score – Clean up your credit score by removing any discrepancies on your credit report and paying off your debt, especially any delinquent credit cards or loans.

Mortgage Calculator Property Tax Value

The “T” stands for taxes in PITI and everyone is required to pay property tax when they purchase a home. Cities and counties use property taxes to pay for things like schools, roads, parks, and police and firefighters. There is not a standard tax rate for everyone. Property tax rates are determined by the local government where the house you want to buy is located. If you know the location and estimated price of the home you want, you can apply that tax rate in our home payment calculator with taxes available at the top of this page.

If you plan to purchase a home in a neighborhood requiring a lot of funding to support public amenities such as schools, parks and community facilities it is likely you will pay higher taxes. Past property taxes paid are also public record, which you can look up online or at city or county offices. However, the best way to get a good property tax rate estimate is to ask your agent or lender. They are familiar with the local market and the value of similar houses in the area.

Mortgage Calculator Insurance Value

The final “I” in PITI is insurance. Homeowners insurance and mortgage insurance are two different types of insurance often added to your monthly mortgage payment.

Homeowners (Property) Insurance

The main role of homeowners insurance is to cover any major expenses that come from damage, theft and personal injuries on your property. The homeowners insurance rate you pay is determined by the property value and property location. When buying a home it may be prudent to undergo a property evaluation to ensure you are paying the right price for the insurance as well as the home itself. The insurance rate is also determined by how susceptible the property is to natural disasters, such as flooding or earthquakes. These factors can impact your homeowners insurance cost.

The easiest way to get an estimate for homeowners insurance is to get a quote from your insurance agent. Be ready to provide them with a neighborhood and approximate home value (price). Simply enter the homeowners insurance estimate from your insurance agent into the Homes for Heroes mortgage calculator.

Mortgage Insurance

Whether you need to pay mortgage insurance depends on your mortgage loan type and down payment amount. The two types of mortgage insurance are Private Mortgage Insurance (PMI) and Mortgage Insurance Premium (MIP).

• Private Mortgage Insurance (PMI) – Private mortgage insurance is paid by a home buyer to cover a mortgage default for the lender. PMI protects the mortgage lender, and is required with a down payment less than a 20% of the home price.
• Mortgage Insurance Premium (MIP) – A mortgage insurance premium is exactly the same thing as private mortgage insurance, but mortgage insurance premiums are applied specifically to FHA loans. If you do not receive an FHA loan, you will not pay a mortgage insurance premium (MIP).

Mortgage Home Loan Types, Terms, and Interest Types

When it comes to purchasing a home, understanding the various types of mortgage home loans, the terms of those loans, and the types of interest rates available can greatly influence the total cost of your loan and your monthly payments. Let’s explore each of these to give you more information so you better understand your options.

Mortgage Home Loan Types

The type of mortgage you choose can significantly affect your interest rate and overall borrowing costs. The Homes for Heroes monthly mortgage payment calculator asks for the loan type you plan to use for your new mortgage. That means it can be an FHA loan calculator, VA loan calculator, and so on. However, our calculator does not include Jumbo loans.

Here are the most common loan types:

• Conventional Loans – Our mortgage calculator can act as a conventional loan mortgage calculator and provide you with a monthly mortgage payment estimate. These are typically offered by private lenders without government backing and are the most popular type of home financing. Conventional loans often require a higher credit score but offer competitive interest rates.
• FHA Loan – Our mortgage calculator can act as an FHA mortgage payment calculator. Backed by the Federal Housing Administration, these loans are ideal for first-time homebuyers or those with lower credit scores. FHA loans generally have lower down payment requirements but come with a higher interest rate due to the perceived higher risk.
• VA Loans – Our mortgage calculator can act as a VA loan calculator to estimate your monthly mortgage payment. Available to veterans and active military members, VA loans are backed by the Department of Veterans Affairs. They offer advantages like no down payment and no private mortgage insurance, typically resulting in lower overall costs.
• USDA Loans – Our mortgage calculator can act as a USDA mortgage calculator and provide you with an estimate of your monthly mortgage payment. Aimed at buyers in rural or suburban areas, USDA loans are backed by the United States Department of Agriculture and offer the possibility of no down payment and lower interest rates, subject to eligibility based on location and income.
• Jumbo Loans – NOT AN OPTION IN OUR MORTGAGE CALCULATOR. Jumbo loans are for properties that exceed the federal loan limits set for conventional loans, and typically come with higher interest rates to compensate for the increased risk lenders take on.

Mortgage Terms

The term of your mortgage, or the length of time you have to repay the loan, also impacts your interest rate and monthly payment amount:

• Short-term Mortgages – Our monthly mortgage calculator is built to be a 15 year home loan calculator, that can estimate your monthly mortgage payment. Typically 10 to 15 years, these loans usually have higher monthly payments but lower interest rates. The shorter duration means less risk for the lender, which gives you less time for interest to accumulate that you would need to pay. This typically makes the short-term mortgage more cost-effective over the long run.
• Long-term Mortgages – Our monthly mortgage calculator is also built to be a 30 year mortgage calculator, that can estimate your monthly mortgage payment. Typically, 30 year mortgages spread payments over a longer period. It reduces the amount of your monthly payments, making it more appealing for many home buyers, but they do accumulate more interest over time. So, this means the total amount it takes to pay off a long-term mortgage ends up being higher than the amount it takes to pay off a short-term mortgage due to the interest you pay over a longer period of time.

Home Loan Interest Types

The type of interest rate you choose for your mortgage can significantly affect your monthly payments and the total amount of interest you’ll pay over the life of the loan:

• Fixed-Rate Mortgages – WE USE FIXED RATE CALCULATIONS for our mortgage payment calculator estimate. Fixed rate mortgages offer a constant interest rate that does not change throughout the duration of the loan, providing stability and predictability in your monthly payments. This can be particularly advantageous when rates are low, locking in those terms for the entire repayment period.
• Adjustable-Rate Mortgages (ARMs) – With ARMs, the interest rate is typically lower at the beginning of the loan but can fluctuate with market trends after a certain period. This means your payments could increase or decrease. These are often chosen by those who anticipate a rise in income or plan to refinance before the rate adjusts.

Each type of loan, term, and interest rate carries its benefits and risks. For instance, while ARMs can offer lower initial rates, the uncertainty of future rate adjustments can be a significant risk. Conversely, fixed-rate mortgages provide long-term budgeting security, though they might start with higher interest rates compared to initial ARM rates.

Influence of Down Payments on Mortgage Payments

A down payment significantly influences the terms of your mortgage and the size of your monthly payments. The Homes for Heroes mortgage calculator asks for a down payment amount to determine a mortgage payment and provide a more accurate estimate. Also, take a moment to check out our post about down payment assistance by each U.S. state to see if there are any money saving options available for you.

When you are able, there are benefits to making a larger down payment:

Lower Loan-to-Value Ratio (LTV)

This means making a larger down payment reduces the loan amount needed to purchase a home. A lower LTV ratio is favorable because it decreases the risk for the lender.

This saves you money over the long run in three ways:

• A larger down payment directly reduces the monthly mortgage payments. It means you have less money to pay off due to a lower principal (amount of home loan remaining after down payment is made), and that you will pay less each month for the duration of your mortgage term.
• You will pay less interest on the lower remaining principal balance of your home loan over the duration of the loan.
• And because there’s less risk for the lender, you may receive more favorable loan terms, such as lower interest rates.

Avoid Mortgage Insurance

For conventional loans, when you make a down payment of 20% or more you can typically avoid private mortgage insurance (PMI). PMI is a monthly premium added to your payments that protects the lender in the event of default. These costs can add up to hundreds of dollars each month, so avoiding PMI when possible can significantly lower your monthly expenses.

More Home Equity from the Start

A larger down payment instantly increases your home equity. Home equity is the portion of your property that you truly “own.” This is beneficial because it immediately increases your overall wealth and provides you with more financial leverage if you need to access home equity loans or lines of credit in the future.

Better Bidding Position

In competitive housing markets, buyers who submit an offer to the seller with a larger down payment often give the seller more confidence in the buyer’s ability to make the purchase without any financial issues getting in the way of closing the sale. This can be a huge advantage when multiple offers are on the table for the home you really want to buy.

It is good to know how your down payment will affect your monthly mortgage payments and general financial well being. Be sure to consider your current savings, monthly budget, and long-term financial goals when deciding on the size of your down payment.

How Can Your Credit Score Impact Your Mortgage Payment?

Your credit score plays a role in determining the terms of your mortgage. Generally speaking, the biggest impact your credit score plays on your mortgage terms is on the interest rate, and the interest rate directly affects your monthly mortgage payment.

Here’s how your credit score can affect your mortgage payments:

Higher Credit Scores Lead to Lower Interest Rates

Generally, the higher your credit score, the lower the interest rate lenders will offer. This is because a high credit score indicates to lenders that you have a history of managing your debt responsibly, which reduces their risk. Lower interest rates mean lower monthly payments and less paid interest over the life of the loan.

Different Loan Types have Different Credit Score Requirements

Most loan types require a minimum credit score of 620. Some lenders will make a few exceptions, but this is the general expectation. However, FHA loans might be available to those with scores as low as 580. Understanding the different requirements can help you determine which loan you might qualify for.

Improving Your Credit Score

Actions such as paying bills on time, reducing your debt-to-income ratio, and correcting any inaccuracies on your credit report can improve your score. Even a small increase in your credit score can lead to significant savings over the term of a mortgage by securing a lower interest rate.

Impact on Mortgage Insurance Rate

For some loan types, such as conventional mortgages, a higher credit score may also reduce the cost of mortgage insurance. Borrowers with higher credit scores often qualify for lower mortgage insurance rates. This can also help to reduce your overall monthly payment.

Understanding HOA Fees in Your Monthly Mortgage Payment

When planning to purchase a home, especially in a planned community, condominium, or townhome, you may encounter Homeowners Association (HOA) fees. If the home you are considering has HOA fees, they need to be considered to determine a more accurate monthly housing cost. Here’s what you need to know about HOA fees and how to incorporate them into your mortgage budgeting.

What Are HOA Fees?

HOA fees are monthly, quarterly, or annual charges that homeowners must pay to cover the costs of maintaining and improving properties in the association. These fees are common in gated communities, condo complexes, and townhouse developments. The fees typically cover common areas such as landscaping, swimming pools, fitness centers, and community facilities. They may also cover services like trash removal, water, and sewage. It all depends on the HOA guidelines.

How HOA Fees Impact Your Mortgage Payment

HOA fees should be considered part of your overall housing expenses, similar to property taxes or homeowners insurance. While they do not directly affect your mortgage payment to the lender, they are typically an amount that needs to be accounted for as a cost for your home.

Calculating Monthly Payments with HOA Fees

To accurately calculate your total monthly housing cost, you should add the HOA fees to your estimated mortgage payment, which includes principal, interest, taxes, and insurance (PITI). For example, if your monthly mortgage payment is $1,500 and your HOA fees are $200, your total monthly housing cost would be $1,700.

Key Considerations with HOA Fees

• HOA fees can vary widely depending on the amenities offered and the location of the property. Luxurious communities with extensive amenities typically have higher fees.
• HOA fees can increase over time, and homeowners might be hit with special assessments for unexpected repairs or lawsuits against the association. Try to learn the history and stability of the HOA before purchasing.
• High HOA fees can impact your loan qualification by affecting your debt-to-income ratio, a key factor lenders consider.

Including HOA Fees in the Homes for Heroes Mortgage Calculator

While the Homes for Heroes mortgage calculator primarily focuses on PITI, we recommend adding your estimated HOA fees to our calculator before clicking “calculate”. It will help to ensure you have a more complete estimate of what you can afford.

In Conclusion

The Homes for Heroes mortgage calculator is an important tool to figure out a monthly mortgage payment estimate. It breaks down the principal, interest, taxes, and insurance (PITI).

Whether you’re a firefighter, EMS, law enforcement officer, military member, healthcare professional, or teacher; understanding these components will help you make informed decisions about the mortgage you use to purchase a home.

The more you know, the better decisions you can make. The right mortgage setup can affect not just your monthly payments, but also the total cost of your home over time. With the guidance provided by Homes for Heroes, you can approach your home purchase with confidence and clarity, while securing a financial arrangement that supports both your immediate budget and long-term financial goals.

Receive an Average of $3,000 from Homes for Heroes

Homes for Heroes assists firefighters, EMS, law enforcement, active military and veterans, healthcare professionals and teachers; buy, sell and refinance their home or mortgage. And, if you work with our local real estate and mortgage specialists to buy, sell or refinance; we provide significant savings after you close on a home or mortgage. We refer to these savings as Hero Rewards, and the average amount received after closing on a home is $3,000, or $6,000 if you buy and sell!

Simply sign up to speak with a member of the team. There’s no obligation. After you sign up a member of our team will contact you to ask a few questions and help you determine the appropriate next steps for you.

When you’re ready, we will connect you with our local real estate and/or mortgage specialists in your area to assist you through every step and save you money when it’s all done.

It is how Homes for Heroes and our local specialists thank community heroes, like you, for your dedicated and valuable service.