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A full mortgage payment (PITI) covers: Principal (reduces your loan balance), Interest (cost of borrowing), Taxes (property tax, usually escrowed monthly), and Insurance (homeowner's insurance). PMI and HOA fees may also apply.

Private Mortgage Insurance (PMI) protects the lender if you default. It is required when your down payment is less than 20% of the home price (LTV > 80%). PMI typically costs 0.5–1.5% of the loan per year and is automatically cancelled once you reach 20% equity based on the original value.

A larger down payment reduces your loan amount (lower monthly payment and less total interest), eliminates PMI if ≥ 20%, and gives you immediate equity. Going from 5% to 20% down on a $400,000 home eliminates roughly $150–200/month in PMI alone.

Amortization is paying off your loan through regular fixed payments. Early payments are mostly interest; later payments are mostly principal. An amortization schedule shows the exact breakdown for every month or year of your loan.

A 30-year mortgage has lower monthly payments but costs far more in total interest. A 15-year mortgage has higher payments but builds equity faster and can save tens of thousands in interest. For example, on a $320,000 loan at 6.5%, a 15-year vs. 30-year mortgage saves over $200,000 in interest.

Extra monthly payments go entirely toward principal, reducing your balance faster. This cuts total interest paid and shortens the loan term. Even $200/month extra on a 30-year mortgage can shave 5–7 years off the loan and save tens of thousands in interest.

LTV = loan amount ÷ home price × 100. A 20% down payment on a $400,000 home gives you an 80% LTV ($320,000 loan). Lenders use LTV to assess risk — below 80% LTV means no PMI and typically better interest rates.

Rates depend on market conditions, your credit score, loan type, and down payment amount. A credit score of 740+ with 20% down will secure the best rates. Even a 0.25% rate difference on a $400,000 30-year loan changes your total interest paid by roughly $20,000.