Rent vs. Buy Mortgage Calculator: How Your Payment Is Built

Principal and interest come from the standard amortization formula: the loan amount, the interest rate divided by 12, and the number of monthly payments. On the default scenario here, a $400,000 home with 20% down at 6% over 30 years gives a principal-and-interest payment of $1,919 per month. Property taxes, homeowners insurance, mortgage insurance and HOA dues are added on top to get your full monthly housing payment.

PITI stands for principal, interest, taxes and insurance. This calculator also folds in mortgage insurance when you put less than 20% down, HOA dues, and a maintenance allowance, because those are real monthly dollars. In the default scenario the ownership add-ons run about $550 a month on top of principal and interest.

There is no single answer. Conventional loans start as low as 3%, FHA at 3.5%, and VA and USDA can be 0% for eligible buyers. A larger down payment lowers your payment and removes mortgage insurance at 20%, but it also ties up cash. The default scenario uses 20% down, which is $80,000, and total cash to close of $80,400 once estimated closing costs are included.

On a conventional loan, mortgage insurance applies while your loan-to-value is above 80% and automatically drops off once the balance reaches 78% of the original purchase price. Paying extra principal, or appreciation plus a new appraisal, can remove it sooner. This calculator models the drop-off automatically instead of charging mortgage insurance for the full loan term.

Early payments are mostly interest and later payments are mostly principal, which is why the first few years build equity slowly. Over the 10-year window in the default scenario, $178,022 goes to interest while $52,206 goes to principal you keep. Rent, by contrast, is effectively 100% interest: none of it comes back.

Yes. Paying discount points buys down your interest rate, which lowers the monthly payment but raises your cash to close. A lender credit does the reverse: a slightly higher rate in exchange for money toward your costs. Whether points pay off depends on how long you stay, which is exactly what the break-even math on the rent vs. buy calculator shows.

Lenders look at your debt-to-income ratio, credit profile, down payment and reserves, not just the payment. A common guideline is keeping total housing costs near or below about a third of gross income, with all debts under roughly 43% to 50% depending on the loan program. Run a payment here, then compare it against renting to see whether the numbers actually work for your timeline.