What is an amortization schedule and how do I read it?
An amortization schedule breaks every payment over the life of your loan into principal (reduces what you owe) and interest (cost of borrowing). Early in the loan, most of each payment is interest because the balance is still high; later payments shift mostly to principal as the balance shrinks. This calculator's schedule lets you toggle between a yearly summary and a full monthly breakdown, with a visual bar showing the principal/interest split for each period and the remaining balance.
How do extra payments shorten my mortgage and save interest?
Every extra dollar you pay goes straight to principal, since the required interest portion is already covered. That shrinks the balance faster, which means less interest accrues on every future payment — a compounding effect. Enter an extra monthly amount in the calculator to see exactly how many years and months you'd shave off a 30-year loan and how much total interest you'd save. Even a modest $100–200/month extra can cut several years off a typical mortgage and save tens of thousands in interest.
What is included in a monthly mortgage payment?
A full mortgage payment covers principal (reducing your loan balance), interest (cost of borrowing), property taxes (usually 1–2% of home value per year), and homeowner's insurance. If your down payment was under 20%, Private Mortgage Insurance (PMI) is also included, typically 0.5–1.5% of the loan per year.
How much mortgage can I afford?
The 28/36 rule is a common guideline: your housing costs should not exceed 28% of gross monthly income, and total debt payments should not exceed 36%. Lenders also look at your debt-to-income ratio (DTI) — most require a DTI below 43%.
What is PMI and how can I avoid it?
Private Mortgage Insurance (PMI) is required by most lenders when your down payment is less than 20%. It protects the lender, not you, and typically costs $50–200/month on a $200,000 loan. You can avoid PMI by putting 20% down, using a piggyback loan, or requesting removal once you reach 20% equity.
What is the difference between a fixed-rate and adjustable-rate mortgage?
A fixed-rate mortgage keeps the same interest rate for the entire loan term — ideal if you plan to stay long-term and want payment stability. An adjustable-rate mortgage (ARM) starts lower but adjusts periodically after an initial fixed period (e.g., a 5/1 ARM is fixed for 5 years, then adjusts annually).
How does down payment size affect my mortgage?
A larger down payment reduces your loan amount, lowers monthly payments, eliminates PMI (if ≥ 20%), and typically qualifies you for a better interest rate. Increasing a down payment from 5% to 20% on a $300,000 home can save $200–400/month.
How much does a 1% difference in mortgage rate matter?
On a $300,000 30-year mortgage, a 1% lower rate saves about $170/month — over $61,000 in total interest over the life of the loan. Even a 0.25% rate improvement is worth pursuing, as it saves over $15,000.