US Mortgage Calculator (Tax & Insurance)

US Mortgage Guide

What's the key thing to understand about PITI — The Full Monthly Cost?

Mortgage lenders use PITI: Principal + Interest + Taxes + Insurance. Many buyers focus on P&I and forget T&I, which can add 20-40% to the monthly bill. A $400,000 home at 6.5% with 20% down has P&I of about $2,022/month. Adding 1.2% property tax ($400/month) + $125/month insurance + $50 HOA = $2,597 total — 28% more than the headline mortgage figure. Always calculate PITI when budgeting, not just principal and interest. Lenders use PITI (plus other monthly debts) for debt-to-income ratio — typically capping total housing costs at around 28% of gross monthly income and total debt at 36-43%, depending on the loan program.

What do I need to know about PMI — Private Mortgage Insurance?

If you put down less than 20%, conventional loans require PMI — insurance that protects the lender if you default. PMI typically costs 0.3-1.5% of the loan amount annually, paid monthly. A $320,000 loan with 0.5% PMI = $133/month extra. PMI automatically cancels when you reach 78% LTV (loan-to-value), and you can request cancellation at 80% LTV. FHA loans have similar 'MIP' (Mortgage Insurance Premium) that for most current FHA loans lasts the LIFE of the loan unless you refinance to a conventional loan once you've built enough equity.

What's the key thing to understand about Property Tax — The Hidden Variable?

Property tax varies enormously by state and locality. Highest property tax rates 2025: New Jersey 2.49%, Illinois 2.27%, New Hampshire 2.18%, Connecticut 2.14%, Texas 1.81%. Lowest: Hawaii 0.27%, Alabama 0.39%, Louisiana 0.55%, Colorado 0.55%, South Carolina 0.55%. A $400,000 home costs $9,960/year in Newark, NJ vs $1,080/year in Honolulu — an $8,880/year difference for the same purchase price. This dramatically affects affordability. California's Proposition 13 caps annual increases at 2% even as property values rise faster, which is why long-time California homeowners often pay dramatically less tax than a new buyer of an equivalent home.

What's the difference between 30-Year and 15-Year Mortgages?

30-year mortgage: lower monthly payment, more interest over time. $400k loan at 6.5%: $2,528/month, $510,178 total interest paid. 15-year mortgage: higher monthly payment, much less total interest. Same loan at 6.0% (typically 0.5% lower for 15-year): $3,375/month, $207,477 total interest. The 15-year saves $302,701 in interest but requires $847/month more cash flow. For most buyers, 30-year provides flexibility (can always pay extra principal but not required during tight months). 15-year mortgages force faster equity building and pay off significantly less total interest, at the cost of a higher required monthly payment with less flexibility.

Why Property Tax Varies So Much by Location in the US

Unlike federal income tax, property tax in the US is set locally — by counties, cities, school districts, and special districts — which is why effective rates can differ by a factor of five or more between states, and even between neighboring counties within the same state. The tax is generally calculated as the property's assessed value (which may differ from its market value depending on local assessment rules and caps) multiplied by a combined "mill rate" set by all the overlapping taxing jurisdictions a property sits within. States with no income tax often lean more heavily on property tax to fund schools and local services, while others keep property tax low and raise revenue through income or sales tax instead — so comparing mortgage affordability across states means comparing total housing cost, not just the loan payment.

Why Your Property Tax Estimate Should Use the Assessed Value, Not the Price You Paid

When you buy a home, many jurisdictions reassess it at or near the purchase price, but the relationship between purchase price and the assessed value used for tax purposes isn't always one-to-one, especially in states with caps that limit how fast assessed value can rise after reassessment (which can leave long-time owners paying tax on a much lower assessed value than a neighbor who just bought the identical house). Because of this, the property tax line in a mortgage payment estimate for a newly purchased home is best based on the likely post-sale reassessed value and the local mill rate, rather than simply copying the seller's current tax bill, which may reflect years of accumulated assessment caps that won't carry over to a new owner.

Escrow Accounts and Why Your Payment Can Change Year to Year

<p>Most US lenders collect property tax and homeowners insurance through an escrow account rather than leaving you to pay the county directly once a year. Each month's mortgage payment includes a slice set aside for these bills, and the lender pays the tax authority and insurer when they fall due. Because property tax assessments and insurance premiums are reassessed periodically, the escrow portion of your payment is not fixed for the life of the loan even on a fixed-rate mortgage — only the principal-and-interest portion is locked. Lenders run an annual escrow analysis, and if your local tax bill or insurance premium rose since the last review, your total monthly payment rises too, sometimes by a noticeable amount, to rebuild the account and cover a larger bill going forward. A shortfall from an underestimated bill can also be spread over the following year's payments. This is why a borrower's monthly cost can climb even without refinancing or changing the loan terms.</p>

How Property Tax Reassessment Works After You Buy

Many first-time buyers get a rude surprise about a year after closing: the property tax bill jumps, sometimes by hundreds of dollars a month. This happens because most counties reassess a property at or near its sale price once the deed transfers, even if the previous owner had been paying tax on a much lower assessed value for years. California's Proposition 13 is the clearest example — a long-held property can carry an assessed value far below market value because annual increases are capped at 2% until a sale triggers a full reassessment at the new purchase price. Texas, Florida, and many other states have similar "assessment caps" or homestead exemptions that reset when ownership changes. The practical effect is that the property tax line in a mortgage calculator should always be based on what the tax bill will look like after reassessment, not what the current owner is paying. Ask the listing agent or title company for the "post-sale estimated tax" rather than trusting the number shown on the current listing, which often reflects a long-time owner's frozen assessment. Some states also apply a different rate or exemption to owner-occupied primary residences versus second homes or rental property, so a buyer intending to rent the home out should budget for the higher non-homestead rate. Appeal processes exist in every state if the new assessment seems too high relative to comparable sales, typically with a filing window of 30-90 days after the notice arrives.

Comparing Property Tax Burden Across States: A Worked Example

Because property tax is set locally, the same home price can produce wildly different monthly costs depending on where it sits. The table below shows typical effective property tax rates (tax as a percentage of home value, annually) for a sample of states — these are illustrative, current-year figures should always be checked against the specific county.

Worked example: a buyer comparing a $350,000 home in Ohio against an equivalent $350,000 home in California. In Ohio, at roughly 1.4%, the annual bill is about $4,900, or $408 a month folded into escrow. In California, at roughly 0.75% (and assuming this is the purchase-triggered reassessed value), the annual bill is about $2,625, or $219 a month — a difference of $189 a month, or over $2,200 a year, purely from location, before even factoring in insurance or HOA dues. Over a 30-year mortgage that gap compounds to tens of thousands of dollars, which is why serious buyers compare the full PITI figure across markets rather than just the sale price or the mortgage rate. It also explains why two borrowers with identical loan amounts and credit profiles can qualify for very different purchase prices once their lender runs the full debt-to-income calculation including local property tax.

Escrow Shortages and the Annual Analysis

Once a year, most mortgage servicers run an "escrow analysis" that compares what was actually collected into the escrow account against what was actually paid out for property tax and insurance over the prior 12 months. If local property tax rose, or if the homeowner's insurance premium increased (both common), the escrow account can end up with a shortage even though every monthly payment was made on time and in full, because the fixed escrow portion built into the mortgage payment a year earlier simply didn't anticipate the increase. When this happens, the servicer typically offers two options: pay the shortage as a lump sum, or spread it over the next 12 months as a temporary increase to the monthly payment on top of the new, higher ongoing escrow amount. This is the single most common reason a homeowner's mortgage payment changes year to year even with a fixed-rate loan where the principal-and-interest portion never moves — the escrow portion for taxes and insurance is reset annually based on actual costs, not the original closing estimate.