# Mortgage Calculator

Prospective homeowners applying for a mortgage tend to have two concerns before they agree to sign: How much interest will I end up paying? And can I afford the monthly payments?

Investopedia’s free online Mortgage Calculator gives you the figures you need to know your monthly mortgage payments and make the right financial decisions when buying a home.

## What Will Your Mortgage Cost?

Investopedia’s Mortgage Calculator is based on a complex formula that factors in your mortgage principal (how much you are borrowing), the interest rate you’re paying and the duration of the loan to determine how much that monthly mortgage payment will be. It lets you try out different scenarios of how much you might borrow and what varying interest rates will do to the amount you’ll be asked to pay. Read below to understand what each of these terms mean.

## Understanding the Mortgage Calculator

Read more about each of the elements that go into the Mortgage Calculator. You can try out different options to see how they affect what you will pay for your mortgage.

### Home Price

This is the full price you will pay for the home. Some of that price will come from your down payment and the balance will come from the mortgage. To make sure you are paying the right price for the home you want, consult real estate websites and talk with your real estate agent to compare the price you are considering to similar properties in the neighborhood where it is located.

### Down Payment

The mortgage down payment is the amount of money you are putting down, in cash, for your new home. Ideally, it should be at least 20% so that you can avoid having to pay private mortgage insurance in addition to your monthly mortgage payment. What Is Mortgage Insurance? will give you the details on private mortgage insurance (required for a conventional mortgage) and on the mortgage insurance premium you will be charged if you get an FHA loan.

### Mortgage Term

This is the number of years during which you will be making payments on your mortgage. The most popular mortgage is a 30-year fixed, with 15-year fixed coming next. Common terms for fixed mortgages are 15 and 30 years, but some banks offer mortgages in other five-year increments from 10 to 40 years. Stretching out payments over 30 years or more will mean that your monthly outlay will be lower, but the overall cost of your home will be more because you’ll be paying interest for more years. To make your home cost less, choose a shorter term, such as 15 years.

### Interest Rate

The interest rate a lender charges you will depend on your credit rating and the rates prevalent in your region, and are influenced by economic indicators, such as the federal funds rate (what banks charge other banks to borrow money overnight) and the yield for 10-year Treasury notes. How Interest Rates Work on a Mortgage will give you detailed information. Go to Investopedia’s Mortgage Rates charts to get the latest information on what mortgages cost today.