Question 1

How do I use this mortgage calculator effectively?

Accepted Answer

Enter your expected home price, down payment (as a percentage or dollar amount), and loan term. Adjust the interest rate to current market conditions, and include your estimated property taxes and homeowner's insurance to see your true monthly PITI payment.

Question 2

What does PITI stand for in a mortgage?

Accepted Answer

PITI stands for Principal, Interest, Taxes, and Insurance. These four components make up your total monthly mortgage payment. Principal and interest go to the lender, while taxes and insurance are typically held in an escrow account to pay the government and insurance companies.

Question 3

What is PMI and when is it required?

Accepted Answer

PMI (Private Mortgage Insurance) is required by conventional lenders if your down payment is less than 20% of the home's purchase price. It protects the lender in case you default on the loan. PMI can usually be removed once you build 20% equity in the property.

Question 4

Should I choose a 15-year or 30-year fixed-rate mortgage?

Accepted Answer

A 30-year mortgage offers lower monthly payments, making it easier to qualify and afford daily expenses, but you'll pay significantly more interest overall. A 15-year mortgage has higher monthly payments, but you'll benefit from a lower interest rate and pay off the loan in half the time, saving tens of thousands in interest.

Question 5

How do extra payments affect my amortization schedule?

Accepted Answer

Making extra principal payments reduces your outstanding loan balance immediately. Because interest is calculated on the remaining balance, every extra dollar paid reduces the total interest you'll owe over the life of the loan and accelerates your payoff date (shortening your loan term).