How much house can you afford? PMI, property taxes, and homeowner's insurance included. See how $200/month extra saves thousands in interest over 30 years.
M = P × [ i(1 + i)^n ] / [ (1 + i)^n - 1 ]The monthly mortgage payment (M) is calculated using the standard amortization formula. The principal loan amount is the home price minus the down payment. The monthly interest rate is the annual rate divided by 12, and n is the total number of monthly payments (loan term in years × 12).
| Symbol | Meaning |
|---|---|
| M | Monthly payment (principal + interest) |
| P | Principal loan amount (home price minus down payment) |
| i | Monthly interest rate (annual rate ÷ 12) |
| n | Total number of monthly payments (years × 12) |
Our calculations are based on established financial and scientific formulas. The following sources inform the default values and methodology used in this calculator:
The buy-vs-rent decision depends on more than monthly payment comparison. Buying builds equity but includes property taxes, maintenance, and closing costs. Renting offers flexibility and lower upfront costs but builds no equity. The "5-year rule" suggests buying makes financial sense only if you plan to stay 5+ years.
| Factor | Buying (Mortgage) | Renting |
|---|---|---|
| Monthly payment | Mortgage + taxes + insurance + HOA | Monthly rent (+ renters insurance) |
| Upfront costs | 10-20% down payment + closing costs (2-5%) | Security deposit + first month rent |
| Equity buildup | Yes (with each payment) | No |
| Maintenance | Owner responsibility (1-2% of home value/year) | Landlord responsibility |
| Property appreciation | Benefits owner | No benefit to renter |
| Flexibility | Low (selling takes time and costs) | High (can move at lease end) |
| Tax benefits | Mortgage interest deduction (in some countries) | None |
| Typical breakeven | 5-7 years of ownership | — |
Home price: $400,000 | Down payment: 20% ($80,000) Mortgage: $320,000 at 6.5% for 30 years Monthly costs (buying): • Mortgage payment: $2,022 • Property tax (1.2%): $400 • Insurance: $150 • Maintenance (1%): $333 • Total: ~$2,905/month Comparable rent: $2,200/month The renter saves $705/month ($8,460/year) but builds no equity. After 5 years: • Buyer equity: ~$30,000 (principal paid) + appreciation • Buyer closing/selling costs: ~$30,000 • Break-even: ~5-6 years if home appreciates 3%/year
If you plan to stay less than 5 years, renting is usually cheaper. If you plan to stay 7+ years and can afford the down payment, buying typically wins due to equity buildup and appreciation.
Private Mortgage Insurance (PMI) and property taxes are two of the most overlooked costs in homeownership. PMI protects the lender — not you — and is required when your down payment is less than 20% of the home's purchase price. Property taxes are levied by local governments based on your home's assessed value and can vary dramatically from state to state. Together, these two costs can add hundreds — even thousands — of dollars to your monthly housing payment.
| Down Payment % | PMI Required? | Typical Monthly Cost | Impact on $300K Home |
|---|---|---|---|
| Under 5% | Yes | $200-450/month | +$200-450/mo |
| 5-10% | Yes | $150-300/month | +$150-300/mo |
| 10-15% | Yes | $100-200/month | +$100-200/mo |
| 15-20% | Yes | $50-100/month | +$50-100/mo |
| 20% or more | No | $0 | $0 |
| State | Avg. Effective Rate | Annual Tax on $300K Home |
|---|---|---|
| New Jersey | 2.23% | $6,690 |
| Texas | 1.60% | $4,800 |
| New York | 1.62% | $4,860 |
| California | 0.75% | $2,250 |
| Hawaii | 0.28% | $840 |
| National Average | 0.99% | $2,970 |
You can eliminate PMI once you reach 20% equity in your home. You can request cancellation once your equity reaches 20%, and the lender must automatically terminate PMI when your equity reaches 22% (under the Homeowners Protection Act). Making extra payments or improving your home's value can help you reach the 20% threshold faster. Property taxes, however, are a permanent cost — though you can appeal your home's assessed value if you believe it is overvalued.
Adding even a small amount to your monthly mortgage payment can dramatically reduce the total interest you pay over the life of the loan and shorten your payoff timeline. Because mortgage interest is front-loaded (amortization), extra payments go directly toward reducing your principal balance, which in turn reduces the interest that accrues on every subsequent payment. The earlier you start making extra payments, the greater the impact.
| Extra Payment/Month | Years Saved (30yr Loan) | Interest Saved on $300K at 6.5% |
|---|---|---|
| $50 | 2.5 years | ~$28,000 |
| $100 | 4.5 years | ~$50,000 |
| $200 | 7.5 years | ~$82,000 |
| $500 | 12 years | ~$130,000 |
| $1,000 | 17 years | ~$170,000 |
| Strategy | How It Works | Annual Extra | Best For |
|---|---|---|---|
| Biweekly | Half payment every 2 weeks (26 payments = 13 full payments) | 1 extra payment/year | Steady income |
| Monthly Extra | Add fixed amount to each payment | Varies | Budget-conscious |
| Annual Lump Sum | One extra payment per year | 1 full payment | Bonus recipients |
| Refinance to 15yr | Switch to shorter term | Higher required payment | Long-term owners |
The key to meaningful savings is consistency. Even $50 per month can save you $28,000 in interest over the life of a $300,000 loan. Set up automatic extra payments so you never have to think about it — and make sure your lender applies the extra amount to the principal balance, not to next month's payment.
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Monthly payment difference, total interest over the loan life, and which term fits your income, goals, and timeline. A $300k comparison at 2026 rates.
Rates verified 2026-10-09 · Sourced from official seller fee schedules