True cost of a mortgage
Banks quote the principal-and-interest line. The full carry — taxes, insurance, PMI, HOA, maintenance, opportunity cost — is what actually lands in your life every month. Plug your scenario in and see the gap.
Inputs
Down payment in dollars: $40,000
APR — the rate the lender quotes you.
Annual, as % of home value. Look up your county’s rate.
Annual premium. Typical US single-family: $1,000–$2,500.
Set to 0 for single-family without an HOA.
Annual, as % of home value. Industry rule of thumb: 1%.
Annual, as % of loan amount. Range 0.46–1.50% by credit + LTV.
What the down payment would earn invested. Long-run S&P 500 ~7%.
Output panel
Assumptions and formula →
P&I formula (standard fixed-rate amortization): PMT = P × r × (1+r)^n / ((1+r)^n − 1), where P is loan principal, r is monthly rate (APR / 12), and n is total months.
Property taxuses the rate × home value / 12. Most US counties charge between 0.5% and 2.5%. Look up your county’s rate; the default 1.25% is a US median.
PMIis included only when your down payment is below 20%. The default 1%/yr is the midpoint of the typical 0.46–1.50% range; lenders set the actual rate based on credit and LTV. PMI is generally cancellable once you reach 78% LTV (US Homeowners Protection Act, 1998); this calculator doesn’t model that termination, so longer-horizon comparisons should be read with that in mind.
Maintenance reserve at 1% of home value per year is the standard budgeting heuristic. Older homes or harsher climates warrant 1.5–2%.
Opportunity coston the down payment is what the cash would have earned if invested instead, at the return rate you set. We default to 7% (long-run nominal US equities). It’s a real cost of ownership even though it never appears on any statement.
Read the long-form derivation: Calculator 1 — True cost of a mortgage →