Full PITI — principal, interest, taxes, and insurance.
Loan Details
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Monthly Cost Assumptions
National avg ~1.1% of home value/yr
National avg ~$125–$175/mo
Total Monthly Payment (PITI)
$2,258
vs. 15-year mortgage
Monthly P&I
$2,858
Interest savings
Save $244,197
Remaining Balance Over Time
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20% Down Rule
Putting down 20% avoids PMI — private mortgage insurance that adds 0.5–1% of the loan amount per year.
15 vs 30 Year
A 15-year mortgage has higher monthly payments but saves significantly in total interest over the life of the loan.
Tax and insurance figures are estimates. Actual costs vary by location, lender, and credit profile. Consult a mortgage lender for exact figures.
Your monthly mortgage payment is calculated using the loan amount, interest rate, and loan term. The formula divides your principal into equal monthly payments while also covering the monthly interest on the remaining balance. Early payments are mostly interest — over time the principal portion grows. This is called amortization.
A 30-year mortgage has lower monthly payments but you pay significantly more interest over time. A 15-year mortgage has higher monthly payments but you build equity faster and pay roughly half the total interest. On a $400,000 loan at 7%, the 30-year costs about $558,000 in total interest while the 15-year costs about $247,000 — a difference of over $300,000.
Lenders use your gross monthly income (before taxes) to qualify you. The standard rule is your total monthly debt payments — including the mortgage — should not exceed 43% of gross income. This is called the debt-to-income (DTI) ratio. Your actual take-home pay is lower, so plan your budget around net income, not gross.
A common guideline is that your total housing cost (mortgage, taxes, insurance) should not exceed 28% of your gross monthly income. On a $100,000 annual salary, that's roughly $2,333/month for housing. However, a more realistic budget uses 25–30% of your net (take-home) pay, since that's the money you actually have. Factor in property taxes (1–2% of home value annually), homeowner's insurance, and potential HOA fees.
Generally, a credit score of 740 or higher gets you the best conventional mortgage rates. Scores between 700–739 get slightly higher rates. FHA loans allow scores as low as 580 with a 3.5% down payment. Each 20-point drop in credit score can cost you 0.125–0.5% in interest rate, which adds up to tens of thousands of dollars over a 30-year loan.
One discount point costs 1% of the loan amount and typically reduces your rate by 0.25%. To decide if it's worth it, calculate your break-even point: divide the cost of the point by the monthly savings. If you paid $4,000 to save $50/month, your break-even is 80 months (about 6.5 years). If you plan to stay longer than that, paying points makes sense.