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Try these mortgage examples:
%
%
years
Loan Amount
$240,000
Interest Rate
5.5%
Loan Term
30 years
Payoff Date
Total Principal
$240,000
Total Interest
$0
Total Cost
$0
$0
$2,400 annually
$0
$1,200 annually
$0
$0
There are several different types of mortgages available to homebuyers, each with their own advantages and considerations.
A traditional mortgage loan that is not insured or guaranteed by the government. These typically require a higher credit score and a down payment of at least 3-5% (with 20% preferred to avoid PMI).
Best for: Borrowers with good credit and stable income who can afford a larger down payment.
Insured by the Federal Housing Administration, these mortgages allow lower down payments (as low as 3.5%) and are more accessible to borrowers with lower credit scores. However, they require mortgage insurance premiums throughout the loan term.
Best for: First-time homebuyers or those with lower credit scores or less money saved for a down payment.
Guaranteed by the Department of Veterans Affairs, these loans are available to eligible veterans, active-duty service members, and certain military spouses. They often require no down payment and no mortgage insurance.
Best for: Eligible military service members and veterans looking to maximize buying power.
Mortgages that exceed the conforming loan limits set by Fannie Mae and Freddie Mac. These loans typically come with stricter qualification requirements and higher interest rates.
Best for: Homebuyers purchasing high-value properties who need larger loan amounts.
When calculating your monthly mortgage payment, you'll often hear the term "PITI" which stands for Principal, Interest, Taxes, and Insurance.
The amount going toward your loan balance and the cost of borrowing. This portion of your payment stays the same with a fixed-rate mortgage.
Local government taxes based on the assessed value of your property. These can change over time as property values change or tax rates adjust.
Insurance that protects your home against damage, theft, and certain types of liability. Required by most lenders.
For conventional loans with less than 20% down payment, private mortgage insurance (PMI) is typically required. For FHA loans, mortgage insurance premium (MIP) is required for the life of the loan in most cases.
Many mortgage lenders use an escrow account to collect, hold, and distribute funds for property taxes and insurance. Here's how it works:
Your lender estimates annual property taxes and insurance costs, divides by 12, and adds this amount to your monthly mortgage payment.
When property tax and insurance bills come due, your lender uses the funds in your escrow account to pay them on your behalf.
There are several strategies that can help you save money on your mortgage over time:
Adding even a small amount to your monthly payment can significantly reduce your loan term and total interest paid. Options include:
Refinancing can be beneficial if:
For a $300,000 mortgage at 4% interest for 30 years:
| Strategy | Time Saved | Interest Saved |
|---|---|---|
| $100 extra monthly | 4 years, 3 months | $26,855 |
| $200 extra monthly | 7 years, 7 months | $46,214 |
| One extra payment yearly | 4 years, 6 months | $28,037 |
| Bi-weekly payments | 4 years, 2 months | $25,798 |
This video tutorial explains how to use our mortgage calculator and understand the key factors affecting your mortgage payments. Learn about principal, interest, loan terms, and strategies to save money over the life of your mortgage.
Running time: 1:50 minutes | Topics: mortgage calculations, amortization, monthly payments