How We Calculate
Every number on this site comes from a formula. This page documents the formulas, the assumptions, the data sources, and the limits of our calculators.
The payment formula
The standard amortization payment formula used on every fixed-rate calculator on this site:
M = P · r(1+r)^n / ((1+r)^n − 1)Where M is the monthly principal and interest payment, P is the loan amount (home price minus down payment), r is the monthly interest rate (annual rate ÷ 12), and n is the total number of monthly payments (loan term in years × 12).
For biweekly mode, we divide M by 2 (26 half-payments per year, equivalent to 13 full monthly payments). For ARM scenarios, we recompute M at each adjustment date using the new rate and the remaining n months on the original term.
Assumptions built into our defaults
When you don't enter a value, we use these defaults. They are educated guesses, not commitments about your situation.
| Field | Default | Why this value |
|---|---|---|
| Home price | $400,000 | Close to the US median sale price in 2024-2025. |
| Down payment | $80,000 (20%) | The conventional threshold above which PMI is not required. |
| Interest rate | 6.5% | In the range of conforming 30-year fixed rates observed in 2024-2026. Replace with your quoted rate for an accurate estimate. |
| Loan term | 30 years | The most common US conforming mortgage term. |
| Property tax | $3,500/year | Approximately 0.9% of the default home price, in line with the US effective property tax rate. |
| Homeowners insurance | $1,350/year | Close to the US national average for a standard homeowners policy on a mid-priced home. |
| HOA | $0 | Many homes are not in HOA communities. Set to $0 by default so totals are not inflated. |
| PMI (when triggered) | 0.5% of loan/year | Mid-range estimate. Actual PMI varies by credit score, LTV, and product; conventional PMI typically ranges from 0.3% to 1.5% annually. |
Where the numbers come from
- Interest rate defaults reflect public reporting of conforming 30-year fixed-rate averages. Replace with your actual quote for accuracy.
- FHA MIP uses the published FHA schedule: 1.75% upfront plus an annual rate that varies by loan term and loan-to-value. Current values are sourced from HUD.
- VA funding fee uses the VA-published fee schedule, which varies by down payment, first-time vs subsequent use, and type of service.
- USDA guarantee fee uses the current annual rate published by USDA Rural Development.
- Property tax is user-supplied. Our default is an educated guess, not a quote from your local assessor.
- Insurance is user-supplied. Our default is an industry-average estimate.
How we handle one-time payments
One-time payments are applied directly to principal at the month you specify. They reduce the balance on which future interest is calculated. The amortization schedule recalculates the remaining payments at the original rate-and-term but on the new, lower balance — keeping the monthly payment constant and shortening the payoff date, OR shortening the term if you prefer.
Update cadence
Mortgage rates are highly market-driven and shift daily. Our calculator defaults are reviewed against conforming benchmarks on a quarterly basis. Program-specific fees (FHA MIP, VA funding fee, USDA guarantee fee) are updated within 30 days of any published change. Formulas are reviewed quarterly and any structural change is documented on this page.
What our calculators do NOT do
- We do not run an underwriter's qualification model. We don't check credit score, DTI, employment history, or reserve requirements.
- We do not pull live tax records. Your actual property tax bill may differ significantly from our default.
- We do not return a Loan Estimate. We do not produce a Closing Disclosure. We are not a lender.
- We do not model state-specific closing costs. Use our Closing Cost Calculator with regional estimates for that.
- We do not give tax or legal advice. Consult a licensed professional before making decisions based on our results.
How to report an issue
Found a calculation that looks wrong, or a default that has drifted from current market? Email editorial@primemortgagecalc.com. We review every report.