How to use the mortgage calculator
- Enter the home price and your down payment percentage.
- Add the interest rate and the amortization period.
- Estimate property tax as a percentage of value and your yearly insurance.
- Review the total monthly payment and the schedule.
The formula
M = L × r(1 + r)^n / ((1 + r)^n − 1) + tax/12 + insurance/12
L is the loan after down payment, r the monthly rate and n the number of payments. Some lenders compound mortgage interest differently (for example semi-annually in Canada); results may differ slightly from a lender quote.
Worked example
A 450,000 home with 20% down at 6.25% over 25 years: the loan is 360,000, principal and interest are about 2,375 a month, and adding tax and insurance brings the total near 2,875.
Tips from the numbers
- A down payment below 20% often triggers mortgage insurance — budget for it.
- Run the numbers at a rate 1–2 points higher to stress-test affordability for renewal.
- Extra payments early in the loan save the most interest.
- Housing costs above roughly a third of gross income leave little room for savings — a common lender guideline.
Watch: learn the concept
Frequently asked questions
What is amortization?
The schedule that splits each payment between interest and principal until the loan reaches zero.
Should I choose a shorter amortization?
Shorter terms raise the monthly payment but reduce total interest dramatically. Choose the shortest you can afford comfortably.
Does this include closing costs?
No. Closing costs, legal fees and moving costs are paid separately — plan for them in addition to your down payment.
How accurate is the tax estimate?
Property tax rates vary widely by municipality. Check your local assessment rate for a precise figure.