Mortgage Calculator

The Real Cost of Homeownership (Spoiler: It's More Than You Think)

So you're looking at houses... you see a nice $350,000 place, figure out the down payment, maybe calculate a rough monthly payment in your head. Seems doable, right? Here's what nobody tells you until AFTER you sign: that "simple" mortgage payment? It's actually five different expenses bundled together, and they can easily add 40-50% to what you initially thought.

I've seen too many first-time buyers focus solely on the purchase price and interest rate, then get blindsided by property taxes ($400/month!), homeowners insurance ($180/month!), and PMI ($250/month!). Suddenly that "affordable" $1,800 mortgage becomes $2,630. Same house, very different reality check.

The Five Things You're Actually Paying Each Month (PITI + PMI)

Principal - This is the only part that's actually YOURS. It's the portion of your payment that reduces your loan balance. Early in the loan, this is depressingly small (like $400 of a $2,000 payment). Later on, it flips and most of your payment goes to principal.

Interest - The bank's profit. This is where they make their money. On a $300k, 30-year loan at 7%, you'll pay roughly $418,527 in interest over the life of the loan. Yes, you read that right - you're paying $718k total for a $300k house. That's why even 0.5% difference in your rate is HUGE.

Property Taxes - Your local government's cut. This varies wildly by location. Texas? Expect 1.5-2.5% of your home's value annually. Hawaii? Maybe 0.3%. On a $350k home, that's $875/month in Texas vs. $88/month in Hawaii. Same house, 10x difference in property tax. Location matters.

Homeowners Insurance - Required by literally every lender. Protects against fire, theft, disasters (excluding flood and earthquake - those are separate). Typically $1,000-2,500/year depending on home value, location, and coverage. Florida and California pay WAY more due to hurricanes and wildfires.

PMI (Private Mortgage Insurance) - Only applies if you put down less than 20%. This is insurance that protects THE LENDER if you default - it does NOTHING for you. Costs 0.5-1% of the loan amount annually. On a $280k loan, that's $140-280/month of pure waste. Good news: once you hit 20% equity, you can request PMI removal and stop throwing away that money.

The Math (Don't Worry, the Calculator Does This For You)

The mortgage payment formula looks intimidating: M = P[i(1+i)^n]/[(1+i)^n-1]

Where M = your monthly payment, P = loan amount, i = monthly interest rate, and n = number of payments. Honestly? You don't need to memorize this or even understand it. That's what the calculator above is for. Just know that it exists and that's how lenders figure out your payment.

What you DO need to understand: small changes in interest rate or loan term create MASSIVE differences in your total cost. A $300k loan at 6.5% for 30 years costs $682k total. Same loan at 7%? You're paying $718k. That 0.5% costs you $36,000. This is why shopping lenders matters.

Down Payment: The More You Put Down, The Less Pain Later

Let's be real: saving 20% down on a $350,000 house means scraping together $70,000. That's brutal, especially for first-time buyers. I get it. But here's why it's worth the wait (or at least aiming for 10-15% if 20% is impossible):

You avoid PMI. At 20% down, no PMI. That alone saves you $200-300/month. Over the life of your loan before you'd normally drop PMI (5-7 years), that's $15,000-25,000 in your pocket instead of the insurance company's.

Lower monthly payments. A $70,000 down payment vs. a $20,000 down payment is a $50,000 difference in your loan amount. At 7%, that's roughly $332 less per month. Every month. For 30 years.

Less interest paid. Smaller loan = less total interest. On a $350k home with 20% down ($280k loan) vs. 5% down ($332.5k loan), you'll save about $125,000 in interest over 30 years. Let that sink in.

Better interest rates. Lenders see larger down payments as lower risk and reward you with better rates. Sometimes 0.25-0.5% better, which as we've established, adds up to tens of thousands.

But here's the catch: Don't drain every penny for your down payment. You need an emergency fund (6 months expenses), moving costs, immediate repairs/furniture, and closing costs (2-5% of purchase price). A house is not liquid - if your AC dies or you lose your job, you can't quickly sell 5% of your house for cash.

15-Year vs 30-Year Mortgages

Feature	30-Year Mortgage	15-Year Mortgage
Monthly Payment	Lower	Higher
Total Interest	Much Higher	Much Lower
Interest Rate	Typically Higher	Typically Lower
Build Equity	Slower	Faster
Budget Flexibility	More	Less
Best For	Tight budgets, first-time buyers	High income, early retirement goals

PMI: The Monthly Payment That Benefits Nobody But The Lender

Private Mortgage Insurance is the most frustrating part of buying a house with less than 20% down. You pay $150-300/month for insurance that protects THE BANK if you default. Not you. Not your family. The bank. It's literally mandatory insurance on their risk, charged to you.

Cost? Usually 0.5-1% of your loan amount annually. On a $300k loan, that's $1,500-3,000 per year ($125-250/month). Multiply that by 5-7 years before you'd normally hit 20% equity... you're looking at $9,000-21,000 thrown into a black hole.

The good news: You can request PMI removal once you reach 20% equity through payments OR home appreciation. Your lender must automatically cancel it at 22% equity. Some people get home appraisals after 2-3 years if their home value jumped - if the appraisal shows 20%+ equity, you can petition to drop PMI early. Worth the $400-600 appraisal fee if you're paying $250/month in PMI.

Alternatives: Some lenders offer "lender-paid PMI" where they charge a slightly higher interest rate instead of monthly PMI. Could make sense if you plan to sell/refinance within 5-7 years. Or consider an 80-10-10 loan (80% first mortgage, 10% second mortgage, 10% down) to avoid PMI entirely. Talk to multiple lenders about options.

The Hidden Costs: Property Tax, Insurance, HOA, and Maintenance

Your mortgage payment is just the beginning. Here's what else you're signing up for:

Property Taxes - Anywhere from 0.3% (Hawaii) to 2.5% (Texas, New Jersey) of your home's value EVERY YEAR. That's $1,050-8,750 annually on a $350k home. And they usually go up every few years as your home is reassessed. Budget for this - property tax liens can result in losing your home if unpaid.

Homeowners Insurance - Typically $1,000-3,000/year depending on location and home value. Coastal areas (hurricanes) and Western states (wildfires) pay significantly more. Shop around annually - insurance companies raise rates hoping you won't notice. And remember, flood and earthquake coverage are SEPARATE policies.

HOA Fees - If your home is in a development with a Homeowners Association, expect $100-500/month (or more). Yes, monthly. That's $1,200-6,000/year for amenities you might not even use. Read the HOA bylaws before buying - some are insanely restrictive about paint colors, landscaping, parking, etc.

Maintenance and Repairs - The 1% rule: budget 1% of your home's value annually for maintenance. $350k home? That's $3,500/year. HVAC dies ($7,000), roof needs replacing ($15,000), water heater leaks ($1,200) - this stuff happens. Unlike renting, YOU are responsible for everything. No more calling the landlord at 2am.

How to Not Get Screwed: Mortgage Shopping Pro Tips

Improve Your Credit Score First. Every 20-40 points can drop your interest rate by 0.25-0.5%. On a $300k loan, that's $40-80/month savings - $14,400-28,800 over 30 years. Pay off collections, dispute errors, and don't open new credit cards for 6 months before applying.

Shop at Least 3-5 Lenders. Don't just use your bank. Get quotes from credit unions, online lenders (like Better.com, Rocket Mortgage), and local mortgage brokers. I've seen rate differences of 0.75% between lenders for the SAME borrower. That's literally $50,000+ over 30 years.

Understand "Points". You can pay discount points (1 point = 1% of loan amount) to lower your rate. Rule of thumb: only worth it if you're staying 5+ years. Buying a starter home you'll sell in 3 years? Skip points. Planning to age in place for 20+ years? Points could save you big.

Lock Your Rate at the Right Time. Rates change daily. When you find a good rate, lock it (typically 30-60 day lock period). If rates drop before closing, ask your lender if they'll renegotiate - some will, some won't. Don't try to perfectly time the market though; you'll drive yourself insane.

Read Every Document. Prepayment penalties (rare but exist), balloon payments, adjustable rates after X years - all buried in paperwork. An ARM (Adjustable Rate Mortgage) might have a great teaser rate for 5 years then skyrocket. Unless you're 100% sure you'll sell/refinance before adjustment, stick with fixed-rate.