One of the most important things homeowners worry about when purchasing a home is the monthly mortgage payment. Understanding what you can afford, how mortgage payments fit into your budget, and how much money you will need to pay as a down payment is critical before you even put an offer on a home.
Our mortgage calculator will not only help you determine what your mortgage payments will be, but also adjust the payments based on several factors including loan terms and interest rate. This gives you an accurate picture of what your payments will look like depending on the house price and the amount of money you put down.
Having worked with thousands of homeowners, we’ve discovered that focusing solely on purchase price without understanding where monthly mortgage payments fit into your budget can cause problems early on.
Our calculator will give you a great starting point so you can better understand down payments, interest rates, and monthly mortgage payments.
It’s important to have a realistic estimate of your home expenses up front, so you can plan ahead and get a home that doesn’t break your bank. That is why we’ve created this calculator: to help you make clear real estate choices that affect your financial future.
To use the calculator, enter the following figures:
With these figures entered into the calculator, you will get an estimate of your monthly mortgage payment.
While it can be difficult to know exactly what some of these figures are, it is okay to guess. Interest rates, property taxes, and homeowners insurance can and do change. We suggest calling insurance companies to get an idea of current homeowners insurance rates, as well as calling banks or lenders to research interest rates.
Our experience has shown that even tiny adjustments in figures, such as interest rates and home insurance rates can make a difference in monthly payments. Keep in mind that longer mortgage terms or higher interest rates can bump up your total cost over time, even though your monthly mortgage payments fit within your budget.
Mortgage payments are paid monthly to your lender, however, they comprise several components in addition to the loan amount.
Principal - This is the portion that includes the actual loan amount, meaning it is paying down your loan balance.
Interest - This is the percentage of your loan that goes directly to your lender as a ‘fee’. During the early stage of a mortgage, a large part of your payment is applied to the interest. This means the lender is making their profit first, before your actual loan amount starts to diminish.
Property taxes - The lender collects these taxes and holds them in escrow, at some point paying them to your county government to cover your home’s property taxes.
Homeowners insurance - Homeowners insurance is typically required by lenders and protects you from damage to your home. Damage can include storm damage, flooding, and other events that may negatively impact your home’s well-being.
Mortgage insurance (PMI) - If you have put down less than 20% toward the purchase of your home, then mortgage insurance is required by lenders. This ensures that if you default on the loan and the home is sold through foreclosure, the lender will recoup the loan to sale price difference.
HOA dues - Some neighborhoods have HOAs that collect dues from homeowners. These dues are often included in monthly mortgage payments and contribute to neighborhood maintenance, such as common areas and gates.
These amounts can add up and dramatically increase monthly home payments which is why it’s important to use our mortgage calculator to give you the most accurate view of your expenses.
As we’ve mentioned, several factors can affect your monthly mortgage payment. These factors can vary widely depending on local market conditions, national circumstances, and even your own credit history.
House price - The price of the house has the biggest impact on your monthly payment. The higher the cost of the home, the larger the loan amount will be needed. This affects both the principal and interest portion of the payments.
Down payment - Basic math shows us that the larger the down payment applied to the purchase of a home, the less loan amount you will need from a lender. A lesser loan amount means a lower monthly payment.
Interest rate - Interest rates directly change your payment and can be affected by national rates, market stability, as well as your own credit score. The higher your credit score, the lower your interest rate, and vice versa.
Loan term - The length of your loan determines how long you will be paying on your loan, and also affects your monthly payment. A 15-year loan will give you higher payments but lower total cost paid at the end of the loan. A 30-year loan gives you lower payments but because of interest, a higher cost overall.
Property taxes - Taxes must be paid on your property and are calculated by multiplying a property’s assessed value by the local tax rate.
Interest rate and length of your loan do more than just affect your monthly payment, they also affect the total life payout of your loan.
Low interest rates reduce the overall cost of the loan, and can decrease the total paid over time as well as your monthly payment. Even small adjustments in rates can have an important impact. To get a better idea, an example would be a fraction of a percentage point can increase or decrease the life of a 30-year loan by thousands of dollars.
The length of the loan also has a measurable impact. For short term loans, for example, 15-year loans, allows you to pay the loan off quicker but result in steeper monthly payments. Longer loans allow for smaller monthly payments but incur a larger total cost over time.
Focusing on affordable monthly payments is important, but we’ve seen many homeowners forget to consider the long-term costs. By considering both the total loan cost and monthly payments, you can get a better picture of your loan commitment.
The balance of your mortgage plays an important role in the final amount of money you walk away with when selling your home.
At the completion of the sale, during closing, the balance of your home loan is paid off with the proceeds of the sale. Your equity relies on the difference between the loan balance and the sale price. These are your proceeds after all other expenses are deducted.
For example, if your home is sold for $250,000 but you owe $150,000 on your mortgage, your equity starts at $100,000. That is the difference between the sale price and your mortgage balance. Then, closing costs are deducted such as real estate agent commissions, lender fees, closing costs, and other miscellaneous expenses. The amount of money left is what you keep.
Here are the most common questions concerning mortgage calculators.
Mortgage calculators estimate monthly mortgage payments according to several key factors like loan term, down payment, interest rate, and home price. The purpose is to estimate what your monthly mortgage payment might be.
Our mortgage calculator includes property taxes and homeowners insurance, however, others may not include these elements.
While actual payments may vary somewhat, mortgage calculators are very reliable. Specific elements such as house cost, lender terms, fees, and insurance can all determine the final amount.
Yes, your mortgage balance does matter when selling your home. The payoff of your loan affects the amount of money you will walk away with after other expenses are deducted.
The difference between interest and principal on your mortgage loan affects your monthly payment. Toward the beginning of your loan, interest (the amount charged by your lender to carry your loan) comprises most of your monthly payment. The principal of your loan (the actual cost of the home) reduces throughout the life of the loan.
At House Buyers of America, we’ve worked closely with homesellers for over 25 years. We understand the highs and lows of selling a home, as well as how important it is that your new home fits comfortably within your budget. If you want to skip the usual hassles of selling a home, such as steep real estate commissions and long days on market, give us a call for a free, no obligation offer. We offer free trash-outs, no need to clean or make repairs, and can get you an offer within 10 minutes. Give us a call today.
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