How to Use a Mortgage Calculator

A mortgage calculator is a useful tool that estimates your monthly mortgage payment based on various inputs, such as home price, down payment amount, loan term and interest rate. By using it you can make an informed purchasing decision and avoid overpaying for your new residence.

The Calculator Part
To start calculating your monthly mortgage payment, enter the property you plan on buying. This information can be gleaned from either a listing for the house you’re interested in or from your local real estate agent or title company. If you don’t have this info, the Mortgage Calculator will prompt you for it.

Next, decide which loan type you would like to apply for: a fixed-rate mortgage or an adjustable-rate mortgage (ARM). Your interest rate will be affected by this decision; generally speaking, ARMs tend to be more costly than fixed-rate mortgages but offer lower initial payments.

Entering your credit score is also vital, as it can affect the interest rate offered to you. Lenders typically charge higher rates to applicants with lower scores; however, many lenders provide a range of loan terms and interest rates to accommodate borrowers of varying financial backgrounds.

When selecting a mortgage, it is essential to take into account both your budget and long-term objectives. Additionally, monthly expenses other than your mortgage should also be taken into account; such as utilities, HOA fees and homeowner’s insurance.

The Calculation Area
Once you enter the above data into the mortgage calculator, it will populate a calculation area on the right side of your screen. You can toggle between monthly and annual views to view how your payments would look. You also have control over home price, down payment amount and loan term so that your calculations are customized specifically to you.

Your Down Payment: If you are making a down payment, the Mortgage Calculator will automatically fill in the Down Payment field to reflect 20% of the home price. This amount is generally required for conventional mortgages; however, it could be lower if you have access to private mortgage insurance.

Insurance that safeguards your lender in case of nonpayment can cost anywhere from 0.5% to 2% of the home price.

According to your loan terms, you may have to pay additional fees or costs that increase your monthly payment, such as mortgage insurance or private mortgage insurance (PMI). These charges can be included in the Advanced Features section of your loan agreement.

Selecting a Realistic Interest Rate
Your mortgage interest rate has an immense impact on how much you owe and how long it’ll take to pay off the loan. Make sure the rate you select is realistic, taking into account current market conditions as well as your personal financial circumstances.