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Your down payment is one of the most consequential financial decisions in the home-buying process. It affects your monthly payment, interest rate, whether you pay PMI, and how much equity you start with. The conventional wisdom of "20% down" exists for good reasons, but it's not the only option.

Common down payment levels and their trade-offs:

• 3–5% down (FHA or conventional) — Gets you into a home sooner, but you'll pay PMI (adding $100–$400/month on a typical loan), have a higher interest rate, and start with very little equity. On a $400,000 home with 5% down, your loan is $380,000 and you could pay $30,000+ in PMI before it drops off.
• 10% down — A common middle ground. You still pay PMI but for a shorter period (typically 5–7 years until you reach 20% equity). Your monthly payment is meaningfully lower than 5% down and you may qualify for a better rate.
• 20% down — The magic threshold. No PMI required, best available interest rates, and you start with significant equity. On a $400,000 home, that's $80,000 upfront—a large sum, but it saves you $200–$400/month in PMI and potentially 0.25–0.5% on your rate.
• 25%+ down — May unlock even better rates from some lenders. Provides a large equity cushion against home price declines.

The opportunity cost argument: Some financial advisors argue that putting down only 5–10% and investing the difference in the stock market (historically ~10%/year) beats the savings from avoiding PMI and a slightly lower rate. This can be true in strong markets, but it adds risk—stock returns aren't guaranteed, while mortgage interest is a certain cost.

Bottom line: If you can comfortably afford 20% without depleting your emergency fund, do it. If not, putting down 10–15% is a solid compromise. Avoid going below 5% unless you're using a VA loan (which requires 0% down and no PMI for eligible veterans).

Private Mortgage Insurance (PMI) is an insurance policy that protects your lender—not you—if you stop making payments on your mortgage. It's required on conventional loans when your down payment is less than 20% of the home's purchase price.

How PMI costs work:

• Annual cost: Typically 0.3% to 1.5% of the original loan amount, depending on your credit score, loan-to-value ratio, and loan type. On a $380,000 loan, that's $1,140 to $5,700/year ($95–$475/month).
• Credit score impact: Borrowers with scores above 760 may pay as little as 0.3%, while those below 680 could pay 1% or more. Improving your credit before buying can save significant PMI costs.
• Payment method: Usually added to your monthly mortgage payment as a separate line item. Some loans offer "lender-paid PMI" where the cost is baked into a higher interest rate instead.

How to remove PMI:

• Automatic termination: By law, your lender must cancel PMI when your loan balance reaches 78% of the original purchase price (not current value), and you're current on payments.
• Request cancellation at 80%: You can request removal once your balance hits 80% of the original value. You must be current on payments with a good payment history.
• Reappraisal: If your home has appreciated significantly, you can pay for a new appraisal to prove your loan-to-value ratio is below 80% of the current value. Some lenders require you to have had the loan for at least two years.
• Refinance: If your home has gained enough equity, refinancing to a new loan with less than 80% LTV eliminates PMI.

FHA loans are different: FHA mortgage insurance premium (MIP) cannot be removed if you put down less than 10%. It stays for the life of the loan. With 10%+ down, MIP drops off after 11 years. This is a major reason many borrowers refinance out of FHA loans once they have enough equity.

The choice between a 15-year and 30-year mortgage is one of the biggest financial decisions homebuyers face. A shorter term means higher monthly payments but dramatically less interest over the life of the loan. The right choice depends on your cash flow, financial goals, and risk tolerance.

The numbers on a $400,000 loan at typical rates:

• 30-year at 7.0%: Monthly P&I of ~$2,661. Total interest paid: ~$558,000. Total cost: ~$958,000.
• 15-year at 6.25%: Monthly P&I of ~$3,432. Total interest paid: ~$218,000. Total cost: ~$618,000. That's $340,000 less in interest.

Advantages of a 15-year mortgage:

• Lower interest rate — 15-year rates are typically 0.5–0.75% lower than 30-year rates.
• Massive interest savings — You pay less than half the total interest of a 30-year loan.
• Faster equity building — You own your home outright in 15 years, freeing up cash flow for retirement investing.
• Forced discipline — The higher payment ensures you're building wealth instead of spending it.

Advantages of a 30-year mortgage:

• Lower required payment — More breathing room in your budget for other investments, emergency savings, or lifestyle spending.
• Flexibility — You can always make extra payments to pay it off faster, but you're not locked into the higher amount if times get tough.
• Opportunity cost argument — If you can earn more investing the monthly difference than your mortgage rate, the 30-year may build more net worth. However, this requires discipline and assumes strong market returns.

The hybrid approach: Take a 30-year mortgage for the lower required payment, but make extra payments as if you had a 15-year. This gives you the flexibility of the longer term while capturing most of the interest savings. Use this calculator's extra payment feature to see exactly how much you'd save.

Making extra payments on your mortgage is one of the most powerful tools available to homeowners. Every dollar you pay above the minimum goes directly toward reducing your principal balance, which means less interest accrues in every subsequent month. The compounding effect can save you tens of thousands of dollars and years of payments.

How extra payments save money:

• Interest is calculated on the remaining balance. When you reduce the balance faster, less interest accrues each month. This creates a snowball effect where an increasingly larger share of each payment goes to principal.
• Example: On a $400,000, 30-year loan at 7%, adding just $200/month to your payment saves approximately $108,000 in interest and pays off the mortgage about 5.5 years early. Adding $500/month saves roughly $195,000 and shortens the loan by over 10 years.

Strategies for extra payments:

• Biweekly payments: Instead of 12 monthly payments, make 26 half-payments. This effectively adds one extra full payment per year without feeling the pinch.
• Lump sum payments: Apply tax refunds, bonuses, or other windfalls directly to your mortgage principal.
• Round up: If your payment is $2,661, round up to $2,700 or $3,000. The small difference adds up significantly over time.

When NOT to make extra mortgage payments:

• If you have higher-interest debt (credit cards, personal loans), pay those off first.
• If you haven't maxed out tax-advantaged retirement accounts (401(k), IRA), the tax savings and compound growth there may beat mortgage prepayment.
• If your mortgage rate is very low (under 4%) and you can earn more investing the difference.
• If making extra payments would deplete your emergency fund (keep 3–6 months of expenses liquid).

Important: Always specify that extra payments should be applied to principal only. Some lenders will apply extra money to future payments instead, which doesn't save you interest. Check with your servicer and verify it on your next statement.

An amortization schedule is a complete table showing every payment over the life of your loan, broken down into how much goes to principal and how much goes to interest. It reveals the often-surprising reality of how mortgages actually work—and why the early years feel like you're barely making progress on your balance.

What the schedule reveals:

• Front-loaded interest: In a 30-year mortgage at 7%, roughly 82% of your first payment goes to interest and only 18% to principal. By year 15, it's about 50/50. By the final year, almost your entire payment is principal.
• The crossover point: There's a specific month where your principal payment first exceeds your interest payment. On a 30-year loan at 7%, this doesn't happen until around year 19. Until that point, most of your money is going to the bank, not your equity.
• Total interest reality: Many borrowers are shocked to see that a $400,000 loan at 7% over 30 years costs nearly $558,000 in interest alone—more than the loan itself. The amortization schedule makes this viscerally clear.

How to use the schedule strategically:

• Evaluate refinancing timing: If you've been paying for 10+ years on a 30-year mortgage, you've already paid most of the interest. Refinancing restarts the amortization clock, which may not save as much as you think.
• Plan extra payments: The schedule shows exactly how much each extra dollar reduces your total interest. Extra payments in the early years have the biggest impact because they prevent the most interest from accruing.
• Understand equity building: The schedule shows your remaining balance at any point, which tells you how much equity you've built (assuming the home hasn't depreciated). This is important for refinancing, PMI removal, and home equity loans.

This calculator generates a full amortization schedule for your specific loan parameters, showing year-by-year (and expandable to monthly) breakdowns of principal, interest, and remaining balance.

The interest rate on your mortgage is arguably the single most important number in the entire home-buying equation. Even small differences in rate—as little as 0.25%—translate to tens of thousands of dollars over the life of the loan. The rate determines not just your monthly payment, but the true total cost of owning your home.

Rate impact on a $400,000, 30-year loan:

• At 6.0%: Monthly P&I of $2,398. Total interest: $463,000. Total cost: $863,000.
• At 6.5%: Monthly P&I of $2,528. Total interest: $510,000. Total cost: $910,000.
• At 7.0%: Monthly P&I of $2,661. Total interest: $558,000. Total cost: $958,000.
• At 7.5%: Monthly P&I of $2,797. Total interest: $607,000. Total cost: $1,007,000.

The difference between 6% and 7.5% is $399/month and $144,000 in total interest. That's why shopping for the best rate is so important.

How to get the best rate:

• Credit score: A score above 760 typically qualifies for the best rates. Every 20-point improvement can save 0.125–0.25% on your rate.
• Shop multiple lenders: Get quotes from at least 3–5 lenders. Rates can vary by 0.5% or more between lenders on the same day for the same borrower.
• Consider buying points: You can pay upfront to reduce your rate (1 point = 1% of the loan amount for roughly 0.25% off the rate). This makes sense if you plan to stay in the home long enough to recoup the cost.
• Larger down payment: Lower loan-to-value ratios may qualify for slightly better rates since the lender takes on less risk.

Property taxes are levied by local governments (county, city, school district) based on the assessed value of your home. They're typically the second-largest component of your monthly housing payment after principal and interest, and they vary enormously by location.

How property tax rates vary by state:

• Lowest: Hawaii (~0.28%), Alabama (~0.41%), Colorado (~0.51%). On a $400,000 home, that's roughly $93–$170/month.
• Average: The national average is about 1.1%. On a $400,000 home, that's about $367/month.
• Highest: New Jersey (~2.47%), Illinois (~2.23%), New Hampshire (~2.18%). On a $400,000 home, that's $727–$823/month—potentially more than your principal payment.

How property taxes work with your mortgage:

• Escrow accounts: Most lenders require you to pay 1/12 of your annual property tax each month as part of your mortgage payment. The lender holds these funds in an escrow account and pays the tax bill when it's due.
• Escrow adjustments: Your tax bill can change each year as your home is reassessed. If taxes go up, your monthly escrow payment increases too—even though your principal and interest stay the same on a fixed-rate mortgage.
• Tax deductibility: Under current tax law, you can deduct up to $10,000 in state and local taxes (SALT) combined, including property taxes. This cap limits the benefit for homeowners in high-tax states.

A critical note for homebuyers: Always research property tax rates before you buy. Two homes with the same listing price in different counties can have wildly different total monthly costs. This calculator includes property tax in its monthly payment breakdown so you see the real picture.

Lenders and financial advisors use several rules of thumb to determine how much house you can afford. The most important metric is your debt-to-income ratio (DTI), which measures your total monthly debt payments against your gross monthly income. But the amount a bank is willing to lend you isn't necessarily the amount you should borrow.

The standard guidelines:

• 28% rule (front-end DTI): Your total monthly housing costs (PITI + PMI + HOA) should not exceed 28% of your gross monthly income. On a $100,000 salary, that's a maximum of $2,333/month for all housing costs.
• 36% rule (back-end DTI): Your total monthly debt payments (housing + car loans + student loans + credit cards + other debts) should not exceed 36% of gross income. Some lenders allow up to 43% or even 50% for well-qualified borrowers, but stretching that far is risky.
• 2.5–3x income rule: A rough shortcut says your home price should be 2.5 to 3 times your annual household income. On $150,000/year, that's $375,000–$450,000. This rule has become less reliable in high-cost markets.

What the rules miss:

• Lifestyle and goals: The 28/36 rule doesn't account for childcare costs, retirement savings goals, travel, or other priorities. Many personal finance experts recommend keeping housing costs at 25% or less of take-home pay (not gross) for a comfortable financial life.
• Hidden costs: Maintenance, repairs, and utilities can add 1–3% of the home's value per year to your total housing costs. A $500,000 home might cost $5,000–$15,000/year in upkeep on top of your mortgage.
• Future income changes: Don't buy at the maximum based on temporary income like bonuses or overtime. Base your decision on stable, recurring income.

Our recommendation: Use this calculator to work backward from a comfortable monthly payment, not forward from the maximum a lender will approve. Start with what you're willing to pay each month and adjust the home price until you find the right balance.

Refinancing replaces your existing mortgage with a new one, typically to get a lower interest rate, change the loan term, or tap into home equity. It can save you significant money, but it's not always the right move—the math depends on closing costs, how long you'll stay in the home, and where rates are relative to your current loan.

When refinancing makes sense:

• Rate drop of 0.75–1% or more: The old rule of thumb said refinance when rates drop 1%. With today's higher loan amounts, even a 0.5–0.75% drop can justify the cost. On a $400,000 balance, a 0.75% rate reduction saves about $200/month.
• Removing PMI: If your home has appreciated enough that you now have 20%+ equity, refinancing eliminates PMI. This alone can save $150–$400/month.
• Shortening the term: Refinancing from a 30-year to a 15-year at a lower rate can dramatically reduce total interest without a huge payment increase if rates have dropped since you originated.
• Switching from ARM to fixed: If you have an adjustable-rate mortgage and rates are likely to rise, locking in a fixed rate provides payment certainty.

The break-even calculation:

Divide your total closing costs by your monthly savings to find the break-even point. For example, if refinancing costs $6,000 and saves you $250/month, you break even in 24 months. Only refinance if you plan to stay in the home past the break-even point.

When NOT to refinance:

• If you plan to sell within 2–3 years—you likely won't recoup closing costs.
• If you're far into your current loan (15+ years on a 30-year). Refinancing restarts amortization, meaning more interest on the front end again.
• If the rate difference is small and closing costs are high. Always run the numbers rather than relying on a lender's pitch.