Mortgage Calculator

Why Use a Mortgage Calculator?

Using a mortgage payment calculator helps you establish a budget before buying a home. Budgeting helps you head off problems and keeps you from getting in over your head financially. If your home purchase will increase your housing costs, for instance, you need to determine where you’ll find the extra money. What expense can you cut to make your home purchase affordable?

A mortgage payment calculator reveals the different components of a prospective mortgage payment. Those include more than just principal and interest. You’ll be paying property taxes and homeowners insurance, and possibly other costs — like private mortgage insurance (PMI) premiums, homeowners association (HOA) dues and flood insurance charges.

However, a simple mortgage calculator does not incorporate all homeownership costs. Maintenance and repairs often surprise first-time buyers. You can estimate potential expenses with one of two formulas: either 1% of the home price per year, or $1 per year for every square foot of space. To make costs more predictable, consider purchasing a home warranty. Additional hidden costs might include higher utility charges, lawn and yard services, higher cleaning costs and new furniture.

How to Use a Mortgage Calculator

Mortgage calculators help you with many steps of your home purchase and allow you to make informed choices. You can use a mortgage calculator when shopping for or purchasing a home, considering when to pay off your mortgage, and when determining the type and length of home loan to apply for. In general, when using a mortgage calculator, you'll need to know the home price, your downpayment amount and the interest rate. Other factors, like HOA fees and insurance, may help you get the most accurate estimate.

• Determining how much of your home you can afford: You can play around with different loan amounts (like jumbo loans) and interest rates to see how they translate into a monthly payment. And by clicking the “Affordability” tab, you’ll see if the home is affordable to you based on typical mortgage lender guidelines.
• Deciding what type of mortgage to get: Mortgage programs offer a combination of advantages and drawbacks. A 15-year loan, for instance, has a lower interest rate and much lower total interest costs than a 30-year loan. But the monthly payment is higher and might not be affordable to you.
• The total cost/interest of the loan: Click the “Schedule” tab and move the slider to see how your loan balance falls over the life of the loan. You can see the allocation of your total payments at any point in time and the total costs over the life of the loan.
• Paying off a mortgage early: Under the “Schedule” tab, input one-time, annual or monthly prepayments to see how they reduce your costs and repayment time.

How to Use the MoneyGeek Mortgage Calculator

To use MoneyGeek's mortgage calculator, you'll need to provide a few simple numbers to determine your home costs. Enter these numbers in the tool above to estimate your overall mortgage costs.

• Home Price: You can input the maximum home price you’re considering and let the calculator determine the loan amount. Or click “Enter a loan amount instead” to find a loan payment without worrying about the other elements.
• Down Payment: You can enter the down payment as either a dollar amount or a percentage of the purchase price. The calculator uses this amount to set the loan amount.
• Interest Rate: Enter the loan’s interest rate. You can get rates from MoneyGeek’s daily mortgage rates report or obtain quotes from individual mortgage lenders.
• Loan Terms: Select the length of your desired loan from the drop-down list. The most common are 15 and 30 years, but 10- and 20-year loans are also available.
• Payments per Year: Payments per year matters when calculating a loan payment. For monthly payments (most common), the number is 12.
• Property Tax: If you know the tax bill for a specific property, you can input it under “Other fees.” Click the “Annually” link and enter the yearly property tax. If you don’t have a specific property, check the assessor’s site to find the local tax rate. You can also enter tax on a monthly basis by clicking the “Monthly” link.
• HOA Fees: If your property has a homeowners association (HOA), you’ll pay dues. Click the “Annually” or “Monthly” link and enter the dollar amount of your dues.
• Principal & Interest: The principal is the part of your payment that returns the money you borrowed to the lender. Interest is what you pay to compensate the lender for advancing money to you.
• Monthly Payment: The total monthly payment includes principal and interest, which repays your loan. You’ll also pay property taxes (either as part of your payment to your lender or separately), homeowners insurance premiums and possible HOA dues.
• Principal Payment: The principal payment is the part of your monthly mortgage payment that reduces your balance. At first, most of your payment goes toward the interest charged.
• Interest Payment: The interest payment is part of your monthly mortgage payment, which covers your interest charges. Over time, this amount becomes smaller as you pay down your loan balance.
• Total Cost with Interest: Your total cost includes the repayment of your principal balance plus the total interest paid to the lender.

Current Rates to Help Calculate Your Mortgage Payments

Changing interest rates can impact your housing costs. To get the most accurate mortgage calculation, you should factor in current interest rates and lock in a low rate when you're ready to buy. Review today's mortgage rates to learn more about economic factors that impact interest trends. This daily report can also help you determine when to lock in your rate.

Geek Out: Equation to Calculate Your Mortgage Payment

Most people use an online mortgage calculator, a spreadsheet or a financial calculator to come up with their principal and interest payment. The actual formula to calculate loan payments by hand is fairly complicated:

M = P [ i(1 + i)^n ] / [ (1 + i)^n – 1]

• P = principal loan amount (that’s your amount borrowed)
• i = monthly interest rate (your annual interest rate divided by 12)
• n = number of months required to repay the loan (term of the loan in years multiplied by 12 months)

You can get a principal and interest, or P&I payment by using the PMT formula in Excel:

PMT(i, n, P)

Finally, you can use a financial calculator to calculate a P&I. Enter the three mortgage loan terms:

• Number of payments (loan term times 12). The entry key will be an N or n.
• Interest rate. Divide the annual mortgage rate by 12 and enter using the I, i or I/Y key
• Loan amount. The amount of the mortgage loan is the present value entered using the PV key.

Select the payment (PMT) key or compute plus payment — CPT plus PMT — keys to calculate the monthly mortgage payment. For example, enter 360 for “n” on a 30-year mortgage. Next, enter 0.0029 for the monthly interest rate on a 3.5% loan and $100,000 for the amount of the loan. The resulting payment amount should be $449.27.