Cost of a mortgage calculator

The lifetime cost of a mortgage

On a 30-year loan, the interest alone can be as large as the amount borrowed. Add 30 years of property tax and insurance and the total cost of the home is far above the purchase price. That does not mean buying is a bad deal, since the home also provides shelter and potential appreciation, but it shows why rate and term matter.

Where to cut the lifetime cost

The biggest levers are the rate, the term and extra principal payments. A shorter term or a lower rate each cut interest dramatically, and even a modest extra payment each month removes years from the loan.

$304,000 loan: 15-year vs 30-year

On a $304,000 mortgage, a 30-year loan at 6.5% costs $1,921.49 a month in principal and interest and $387,733 in total interest. A 15-year loan at a rate about 0.6 points lower costs $2,548.93 a month, $627.44 more, but cuts the interest to $154,807, saving $232,925. The right choice depends on whether the higher payment fits your budget with room to spare.

What each 6.5% ± 1 point does to the payment

A one-point change in your mortgage rate moves the payment on $304,000 by roughly $204.12 a month and the lifetime interest by about $73,490 over 30 years. That is why it pays to compare several lenders on the same day.

Down payment and PMI on a $380,000 home

With less than 20% down, lenders charge private mortgage insurance (PMI), commonly 0.3% to 1.5% of the loan per year. This page assumes 0.6%. PMI usually ends when you reach 80% of the home's original value, which you can reach sooner with extra payments.

What you will have paid by each year

Over 30 years the $304,000 loan costs $691,733 in principal and interest, of which $387,733 is interest, and about $862,132 including taxes, insurance and PMI.

What income does a $380,000 home need?

Lenders often look at a front-end ratio of about 28% of gross income for housing costs. A total payment of $2,394.82 implies a gross income near $103,000 a year, and lenders also weigh your other debts, which usually must keep total payments under about 36% to 43% of income.

Year one is interest-heavy: $19,660 of interest against $3,398 of principal repaid, which is why extra payments early on have the most effect.

How fast you build equity

Equity here is the home price minus the loan balance, assuming the price stays flat. Appreciation, if any, would add to it.