Down Payment Calculator

How a down payment affects your mortgage

The down payment is the portion of the purchase price you pay upfront. The rest becomes your loan principal. A larger down payment means a smaller loan, which lowers your monthly payment and reduces the total interest you pay over the life of the mortgage.

For US conventional mortgages, putting down at least 20% also eliminates the need for private mortgage insurance (PMI), which lenders typically require on loans with less than 20% equity. PMI protects the lender, not the buyer, and adds a recurring cost until you reach 20% equity.

The mortgage payment formula

Monthly principal and interest is calculated using the standard fixed-rate amortisation formula. The result depends on three variables: the loan amount (home price minus down payment), the annual interest rate converted to a monthly rate, and the total number of monthly payments.

Understanding private mortgage insurance (PMI)

For US conventional mortgages, PMI is typically required when the down payment is less than 20% of the home price. Annual PMI costs generally range from 0.5% to 1% of the total loan amount, depending on credit score, loan-to-value ratio, and lender policies. This calculator uses 0.75% as a planning estimate.

Under US conventional-mortgage rules, PMI is not permanent. Once you reach 20% equity through payments or appreciation, you can usually request PMI cancellation. Lenders are required to automatically remove PMI when equity reaches 22% based on the original purchase price.

Worked example: 350,000 home with 10% down

Suppose a buyer is looking at a 350,000 home, plans to put 10% down, chooses a 30-year loan term, and expects a 6.5% interest rate. The upfront down payment would be 35,000, leaving a financed amount of 315,000 and a 90% loan-to-value ratio.

Because the down payment is below 20%, PMI would usually still apply. On the calculator’s planning assumption of 0.75% annually, that adds an estimated 196.88 per month until enough equity is built. Comparing that result with 15% and 20% down makes it easier to judge whether keeping more cash in savings outweighs the higher monthly cost.

What this calculator does not cover

This tool estimates principal, interest, and a US conventional PMI planning baseline only. It does not include property taxes, homeowner insurance, HOA fees, closing costs, or points. Actual mortgage costs depend on your lender, credit profile, property type, local tax rates, and loan program.

The PMI estimate uses a flat 0.75% rate as a planning baseline. Your actual PMI rate may differ based on your credit score and lender. For a complete picture, request a Loan Estimate from your lender.