Mortgage Calculator

A mortgage calculator helps prospective home loan borrowers figure out what their monthly mortgage payment will be. A mortgage payment calculator takes into account factors including home price, down payment, loan term and loan interest rate in order to determine how much you’ll pay each month in total on your home loan. Other associated costs may include property taxes, home insurance and mortgage insurance.

How to calculate your mortgage payment

Mortgage calculators take into account a variety of different factors when determining your monthly mortgage costs. They can include the price of your home, your down payment, your monthly interest rate and the term length of your mortgage. If your math skills are a little rusty, a mortgage calculator does the hard work for you in order to determine your monthly payment and associated costs.

The basic formula for calculating your mortgage costs: P = A[R(1 + R)^T]/[(1 + R)^T – 1]

  • P stands for your monthly payment
  • A stands for your loan amount
  • T stands for the term of your loan in months
  • R stands for the monthly interest rate for your loan

For example, let’s say that John wants to purchase a house that costs $125,000 and has saved up a $25,000 down payment. His loan amount (A) is $100,000, the term length (T) is 15 years (180 months) and the monthly interest rate (R) is 4.20%. In this scenario, John’s monthly mortgage payment (P) will be $749.75.

John’s mortgage cost formula will look like: 749.75 = 100,000[4.2(1+4.2)^180/[(1+4.2)^180-1)

If John wants to purchase the same house with a 30-year term length, the formula works in much the same way. In this scenario, his loan amount (A) is $100,000, term length (T) is 30 years (360 months) and monthly interest rate (R) is 4.20%. With a 30-year mortgage, John’s monthly mortgage payment (P) will be $489.02.

John’s mortgage cost formula will look like: 489.02 = 100,000[4.2(1+4.2)^360/[(1+4.2)^180-1)

By using a mortgage calculator, prospective homebuyers can determine just how much they’ll be paying each month for their new home. Mortgage calculators are an easy, convenient way to determine how much you’ll be able to afford. They also allow borrowers to experiment with different down payments, loan term lengths and home prices. 

Why should I use a mortgage calculator?

  1. To decide if an ARM loan is right for me ­– An ARM loan, also known as an adjustable-rate mortgage, has an interest rate that changes over time. After a fixed-rate introductory period, ARM rates can fluctuate depending on the economy. There are usually set limits when it comes to how much the interest rates can increase from year to year, as well as limits over the length of the loan. While ARM loans can offer an enticingly low introductory rate, you run the risk of increasing monthly payments over time. Mortgage calculators can help you decide whether an ARM rate is worth the risk or if a conventional fixed-rate mortgage is a better option.
  2. To figure out if a home is out of my price range – Because a mortgage calculator allows prospective borrowers to calculate their monthly costs, it can help buyers decide on a good price range for purchasing a home. A good rule of thumb is to spend no more than 30% of your monthly income on a housing payment.
  3. To figure out what my payments would be with more or less money down – Mortgage calculators can also help borrowers decide on an optimal down payment amount. In general, the larger your down payment, the lower your monthly costs will be. A larger down payment can also help you avoid paying for mortgage insurance. The more money you can save up for a down payment on a house, the less you’ll end up spending on interest and fees. Depending on the price of your home, a mortgage calculator can help you figure out what the best down payment will be.
  4. To decide what the best loan term is – Mortgages are commonly offered with either 15 or 30-year terms. Longer-term lengths will reduce your monthly payment, but you’ll pay more interest over time. Shorter-term lengths have higher monthly payments but may end up saving you money in the long run. When deciding on a term length for your mortgage, it’s also a good idea to consider other related factors, such as how long you plan to live in your home and whether or not you plan to refinance.
  5. To figure out associated costs – When it comes to buying a house, most people focus on the down payment as the biggest cost associated with homeownership. However, there are a variety of associated costs that are easy to overlook, including insurance, property taxes and homeowners association dues. Mortgage calculators can help you to include these additional factors when you’re determining the necessary monthly payments for your new home.

The final word

Ultimately, mortgage calculators ensure that borrowers are more informed when it comes to the financial side of purchasing a home and enable home buyers to make the choices that are right for their financial situation. Once you’re done calculating your mortgage, compare the best mortgage rates of this year to see which lender best fits your needs.

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