Mortgage Loan Payment Calculator for Estimating Monthly Payments
What’s the best way to save money on your mortgage? Is it to reduce monthly payments? Or is it to maximize monthly payments to pay off your loan faster? Will you save more money with a smaller loan attached to a higher interest rate, or will the complete opposite, a large loan with a low interest rate, provide you with a better financial outlook, in both the short and long terms?
No one can answer these questions for you. Only YOU know the particulars about your current financial life, your long-term financial goals, and what your property means to you. But even considering the many subjectivities involved in the equation there is one constant in the world of decoding mortgages, monthly payments and property taxes, and that’s the fact using a mortgage loan payment calculator will help YOU determine the right terms for YOUR home loan. No single action will make a bigger difference when it comes to getting what you want from your home loan than spending a little time tooling around with a mortgage calculator.
Can I Afford This House?
The question above is what many potential homeowners ask themselves. And getting the answer is much simpler than you think. Basically, what it comes down to is how much you can borrow and how much money you can afford to part with for a down payment.
No one knows your financial situation, your goals for the future or what owning a home means to you better than you do. And a mortgage loan payment calculator can certainly help you to determine just how much of a home you can afford.
Qualification Doesn't Always Mean Affordability
Even though you may have already qualified for your mortgage, you may still have trouble making your payments. And what about leaving money aside for an emergency fund? These and several other things must be taken into consideration when deciding about how much house you can afford.
About the Bank
You will want to make sure that your housing ratio is 28% or lower when applying for a loan at the bank. The housing ratio will be that portion of your income which will go to housing expenses. Another ratio to be aware of is the total obligation ratio. This is defined by the portion of your income which goes toward both your housing expenses and your other financial obligation. Some examples of the latter could be child support or credit card payments. For the total obligation ratio, 36% or lower is the number to shoot for.
Gross Monthly Income and Debt
Your gross monthly income should not only include the amount you're paid before taxes, but also any commissions and bonuses you've received, the amounts of which should be averaged by month and cover the last two years.
Your debt payments are another aspect of your financial life that should be considered when deciding on home affordability. But it's important to include all of your monthly payments, which means obligations like alimony payments and student loans should be included alongside credit card and car payments.
Property Tax and Mortgage Insurance
Finding property tax estimates for the area your potential home is in will help you determine how much you will pay. This can be accomplished by consulting your local government web site.
Mortgage insurance will be something you pay if you are putting less than 20% down on your new home. This amount could land anywhere between $50 and $100 per month. But it's best to ask your lender for an exact amount.
Payments, Loan Terms and Interest Rate
Once you've figured out your housing and total obligation ratio percentages, it becomes easier to see how much of a monthly payment you can afford to make.
Based on this number, you can then compare it with the interest rate and term of your idea loan. Keep in mind that your interest rate may be higher if you plan to put less than 20% down or your mortgage, for whatever reason, doesn't adhere to particular standards.
Estimated Equity, Costs and Spendable Savings
For those with a current home, the home's current value, minus the outstanding loan amount will need to be calculated. This number can be easier to come by when local real estate listings are checked, as these will provide a ballpark figure. But it's best not to overestimate.
Estimating selling and closing costs will be next. Plan on factoring in commission for the broker, usually five percent of the sale price, and add attorney fees. Closing costs will vary, but should range from three to five percent of your home's cost.
Tweaking the Numbers
You may have to adjust some of the amounts you provided for each category if the amount you borrow turns out to be lower than you expected. Adjusting your debt levels will make a significant difference here.
Forgetting to factor in private mortgage insurance will also affect your numbers. Ensure that PMI is included if you are putting less than 20% down on your new home.
Mortgage Calculator Tips
Whether you're looking at one property or several, using a mortgage calculator can help. Run the numbers for every property you consider, as you won't know the true value or the affordability of any property until and unless you can get cost estimates for both the short and the long term.
Understanding what numbers change when going from one property to another is something else to consider. Property taxes and interest rates from different banks are just two examples.
Utilizing a home mortgage calculator is a no brainer when it comes to doing your homework in this area. By understanding what your total costs will be at the end of the day, both from a monthly cashflow perspective as well as the total amount paid over the course of the loan, you can estimate a budget much more effectively.
The same holds true for a refinance home mortgage calculator. By determining any potential savings by adjusting the terms of your existing loan, you can ascertain whether the cost of a refinance is worth the potential cost savings.
In fact, a mortgage interest calculator can help you understand what the long-term benefits of a new loan would be if you were able to shave your interest rates, while simultaneously reducing your loan duration. With the current interest rates in the mortgage industry being at an historical low, consumers should focus on taking advantage of them.