What's in a mortgage payment
Your monthly payment is usually more than principal and interest. Most lenders also collect property tax and homeowners insurance in an escrow account, and add PMI (private mortgage insurance) if you put down less than 20%. Condos and some neighborhoods add HOA dues.
How rate and term change the cost
A 15-year loan has a higher monthly payment but saves a large amount of interest compared with a 30-year loan. Even a small rate difference adds up: on a $320,000 loan, each 0.5% changes the payment by roughly $100 a month. Early in the loan, most of each payment goes to interest; that shifts toward principal over time.
The tax side of owning a home
Mortgage interest on up to $750,000 of debt and property taxes (within the SALT cap) can be deducted if you itemize. With the larger standard deduction, many homeowners no longer itemize, so the tax benefit may be smaller than expected. Check yours with the mortgage interest deduction calculator.
Frequently asked questions
How much house can I afford?
Lenders often look for total housing costs under about 28% of gross monthly income and total debt payments under about 36% to 43%. Test a few prices until the monthly payment fits your budget, not just the lender's limit.
When does PMI go away?
On a conventional loan, you can ask to cancel PMI when your balance reaches 80% of the home's original value, and it ends automatically at 78%. FHA loans have different rules.
Is it better to pay extra on my mortgage or invest?
It depends on your rate, your other debts, your emergency savings and your tax situation. Paying down a high-rate mortgage is a guaranteed return; investing may earn more over time but carries risk.