ClearCalcWhat goes into a mortgage payment
Lenders often describe the monthly cost of a home as PITI: principal, interest, taxes and insurance. The loan itself only covers the first two. Property tax and insurance are often collected monthly with the loan (through an escrow account), so this calculator includes them, plus any building, estate or HOA fees.
- Principal and interest – the loan repayment, calculated with the standard amortization formula.
- Property tax – set by your local government, usually a percentage of the property's assessed value.
- Home insurance – covers the building against fire, storms and other damage; lenders usually require it.
- Fees – homeowners' association, estate management or service charges.
How much house can I afford?
A common rule of thumb is to keep your total housing payment below about 28% of your gross monthly income, and all debt payments combined below about 36%. These are guidelines, not limits. Lenders in different countries use different ratios, and your own budget matters more than any formula.
A bigger down payment lowers both the monthly payment and the total interest. In many markets, putting down less than 20% also means paying for mortgage insurance, which raises the monthly cost further.