Common questions about mortgage costs and calculations
Principal, Interest, Taxes and Insurance — the four standard components of a mortgage payment. Principal and interest are fixed on a fixed-rate loan. Taxes and insurance are not, which is why an escrowed payment can rise even on a "fixed" mortgage. See how payments work.
Because most calculators, including the basic view here, show principal and interest only. Property taxes, homeowner's insurance, private mortgage insurance and HOA dues sit on top, and together they can add a great deal. Treat any principal-and-interest figure as the floor rather than the answer.
Lenders assess your debt-to-income ratio, and common guidance keeps total housing costs to roughly 28% of gross income with total debt under about 36% — though limits vary by loan type and lender. Worth saying plainly: the maximum you qualify for and the amount you should borrow are different numbers. Approval does not account for childcare, retirement saving, maintenance or how secure your income feels.
Substantially — and most of all early. Interest is charged on the outstanding balance, so principal removed in year two avoids nearly three decades of accrued interest, while the same amount in year twenty-five avoids very little. Confirm with your lender that extra payments are applied to principal rather than held as a prepaid instalment.
It depends entirely on how long you keep the loan. Divide the up-front cost by the monthly saving to get a break-even month; if you expect to sell or refinance before then, the points cost you money. Points are a bet on staying put, so price them against how confident you are about that.
Not meaningfully. Scoring models treat multiple mortgage enquiries within a short window — commonly 14 to 45 days depending on the model — as a single event, precisely so that comparison shopping is not penalised. Concentrate applications into a couple of weeks. Given the spread between lenders on identical borrower profiles, this is the highest-return hour in the process.
When the total cost of refinancing is recovered by the savings within a period you will actually stay. The trap is amortisation: refinancing into a fresh 30-year term restarts the interest-heavy early years, so a lower monthly payment can still mean paying more interest overall. Compare total remaining cost, not just the monthly figure.
On conventional loans, PMI generally ends once you have built sufficient equity, with rules about automatic termination and about requesting cancellation earlier. FHA mortgage insurance behaves differently and, depending on when the loan originated and the down payment, can last the life of the loan. Check your own loan documents rather than assuming.
A 15-year loan usually carries a lower rate and dramatically less total interest, at a much higher monthly commitment that you cannot reduce later. A 30-year offers flexibility, and you can always pay extra voluntarily. The honest question is whether you would reliably make those extra payments — many people prefer the enforced discipline of the shorter term, and many overestimate their future selves.
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