Mortgage Payment Shock Calculator

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Table of contents

• How to use
• Common mistakes
• Definitions
• Methodology
• Limitations & assumptions
• Sources

Mortgage balance still owed ($): The unpaid principal balance on the loan today.

Current monthly payment ($): What you pay now each month. Use the total monthly payment if you want a total-payment comparison.

Principal and interest: The loan part of the mortgage payment. Principal pays down the balance, and interest is the lender charge for borrowing.

Total monthly payment: Principal, interest, mortgage insurance when it applies, and escrowed taxes and homeowners insurance; some HOA fees may be paid separately [2].

New monthly taxes, insurance, HOA, and PMI ($): The monthly non-loan costs you want included in the new estimated payment.

Payment shock: The signed change from the current payment to the estimated new payment. Positive means the payment rises. Negative means it falls.

Extra rate to test (percentage points): The added rate used for the stress test. One percentage point changes 7% to 8%, not to 7.07%.

Mistake: Using the original loan amount for Mortgage balance still owed ($).
Fix: Use the current principal balance from your mortgage statement.

Mistake: Entering years instead of months in Months left to pay.
Fix: Multiply years by 12, so 25 years left is 300 months.

Mistake: Comparing Current monthly payment ($) without escrow to a new payment that includes New monthly taxes, insurance, HOA, and PMI ($).
Fix: Use the same payment style on both sides when possible, or know that the shock includes the added escrow difference.

Mistake: Typing 0.07 in New yearly interest rate (%) when you mean 7%.
Fix: Enter 7 for 7%, or 7.25 for 7.25%.

Mistake: Treating Extra rate to test (percentage points) as a percent multiplier.
Fix: Enter 1 to test one full percentage point higher, such as 7% becoming 8%.

Mistake: Entering annual income in Monthly household income before taxes ($).
Fix: Use one month of income before taxes, such as 8,000 if the household earns $96,000 per year.

• This is an estimate, not a lender quote. Your servicer may use exact dates, fees, rounding rules, escrow analysis, or rate caps that are not entered here.
• The calculator assumes the Mortgage balance still owed ($) is newly amortized across the entered Months left to pay.
• New monthly taxes, insurance, HOA, and PMI ($) is treated as one monthly amount. It does not forecast future tax bills, insurance premiums, HOA dues, or PMI cancellation.
• Current monthly payment ($) should be comparable with the new payment. If one includes escrow and the other does not, the shock mixes loan-rate change with escrow change.
• The stress test adds Extra rate to test (percentage points) directly to New yearly interest rate (%). It does not apply ARM adjustment caps or lifetime caps.
• Monthly household income before taxes ($) is optional and uses gross monthly income. It does not measure debt-to-income ratio because it ignores other debts and living costs.
• Very short remaining terms can create large payments. Recheck Months left to pay if the result seems extreme.

Calculation steps

The calculator first converts the New yearly interest rate (%) to a monthly decimal rate by dividing by 100 and then by 12.

monthly_rate = new_yearly_interest_rate_percent / 100 / 12

It then calculates the amortized loan payment on Mortgage balance still owed ($) over Months left to pay. If the monthly rate is 0, it divides the balance evenly across the remaining months.

new_principal_and_interest_payment = balance * monthly_rate * (1 + monthly_rate)^months_left / ((1 + monthly_rate)^months_left - 1)

if monthly_rate = 0: new_principal_and_interest_payment = balance / months_left

The estimated total payment adds the entered escrow-style monthly costs. CFPB explains that total monthly mortgage payments can include principal, interest, mortgage insurance, escrowed taxes, and insurance [2].

new_monthly_payment = new_principal_and_interest_payment + new_monthly_escrow

Payment shock is the new total payment minus Current monthly payment ($). The sign is kept because a negative shock means the estimated payment is lower than today.

monthly_payment_shock = new_monthly_payment - current_monthly_payment

payment_shock_percent = monthly_payment_shock / current_monthly_payment * 100

The stress-test payment uses the same balance, term, and escrow, but adds Extra rate to test (percentage points) to the new yearly rate. This is useful because adjustable-rate mortgage payments can change over time [1], and regulators use the term payment shock when discussing recasts and higher required payments [3].

stress_test_monthly_payment = payment(balance, (new_interest_rate_percent + stress_extra_rate_percent) / 100 / 12, months_left) + new_monthly_escrow

If Monthly household income before taxes ($) is entered, the calculator divides the new total payment by that income.

income_share_after_reset = new_monthly_payment / monthly_household_income * 100

Mini-example

Suppose the balance is $300,000, 300 months are left, the current payment is $2,200, the new rate is 7%, and new monthly escrow-style costs are $600. The new principal-and-interest payment is about $2,120.34, so the estimated new monthly payment is about $2,720.34. The monthly payment shock is $520.34, which is about 23.65% higher than the current payment. With $8,000 of monthly household income, the new payment uses about 34.00% of income. If the stress-test rate is one point higher, the estimated payment is about $2,915.45.