Mortgage payments are complicated. Bankrate’s Mortgage Calculator simplifies this problem.
Next to the «Home price» space, enter the price (if buying) or current value (if refinancing).
If you are buying a home, enter the down payment amount or equity if you are refinancing. A down payment is a cash that you pay upfront to buy a home. Home equity is the amount of the home less what you owe. You can either enter a dollar amount or a percentage of the purchase price.
Next, choose «Length,» and the calculator will adjust the repayment schedule.
In the «Interest Rate» box, you can enter the rate that you are willing to pay. The default rate used by our calculator is the current average rate. However, you can change the percentage. The rate you pay will depend on whether you are buying or refinancing.
After entering these numbers, a new amount of principal and interest will be displayed to the right. Bankrate’s calculator estimates homeowners insurance, property taxes, and homeowners association fees. These costs can be edited or ignored as you shop for a loan. However, they may be added to your monthly escrow payment. They don’t affect the principal or interest while you are exploring your options.
The typical costs of a mortgage payment
Principal and interest make up the majority of your mortgage payments. The principal is the amount that you borrowed. While the interest is what you pay to the lender for borrowing it, the principal is the amount that you borrowed. The lender may also collect an additional amount each month to place into escrow. This money is typically paid directly to the local tax collector or to your insurance carrier.
- Principal: This is how much you borrowed from the lender.
- The interest rate is the amount the lender charges to loan you the money. The annual percentage of interest rates is expressed in dollars.
- Property taxes: The local authorities assess an annual tax on your property. With each monthly mortgage payment, you will pay approximately one-twelfth of your annual tax bill if you have an escrow.
- Insurance for homeowners: This insurance covers financial loss and damage from fire, storms, and theft. You will have an additional policy if you live in a flood area. If you are in a hurricane country or in an earthquake country, you may have a third policy. You pay one-twelfth each month of your annual premium, while your lender or servicer pays it when it is due.
- Mortgage insurance: A down payment of less than 20% of the purchase price will likely put you on the hook for mortgage coverage. This is also added to your monthly payments.
- How a mortgage calculator could help
- It is important to determine your monthly house payment when you are setting your housing budget. This will likely be your biggest recurring expense. Bankrate’s mortgage calculator allows you to calculate your monthly mortgage payment as you shop for a loan, refinance or purchase. Simply change the information you provide to the calculator to see different scenarios. This calculator will help you make a decision:
- Choose the loan term that suits you best. A 30-year fixed-rate mortgage might be the best choice. Although you will pay less monthly, these loans offer lower monthly payments. However, you will be paying more interest over the life of the loan. A 15-year fixed-rate mortgage will reduce the total interest that you pay, but your monthly payments will be higher if you have more money.
- An ARM might be a good choice. As interest rates rise, it may be tempting to opt for an adjustable-rate mortgage (ARM). ARMs typically have lower initial rates than their conventional counterparts. If you intend to remain in your home for a short time, a 5/6 ARM might be the best option. It has a fixed rate for five years and then adjusts every six months. Pay attention to the potential changes in your monthly mortgage payment after the introductory rate ends.
- If your monthly expenses are higher than you can afford, the Mortgage Calculator will show you how much you can expect each month to be. This includes taxes and insurance.
- The amount to deposit. Although 20 percent is the minimum down payment, it’s not mandatory. Many borrowers only deposit 3%.
- Deciding how much house to buy
- If you are unsure how much income should be allocated to housing, then follow the tried-and-true 28/36 percent rule. Many financial advisors recommend that you don’t spend more than 28 percent of your gross monthly income on housing, such as rent, mortgage payments, or other expenses. You should also not spend more than 36 percent on total debt, which includes student loans, mortgage payments, credit card bills, and medical bills. This is an example of how this looks:
- Joe earns $60,000 per year. This is a monthly gross income of $5,000. $5k x 0.28 = $1.400 monthly mortgage payment (PITI).
- Joe’s monthly total mortgage payments, including principal, interest, and taxes, should not exceed $1,400. This is a loan limit of approximately $253,379. You can still qualify for a mortgage if you have a debt-to-income (DTI ) ratio of up to 50% for certain loans. However, spending so much on debt could leave you with little money for your other living expenses, retirement savings, and discretionary spending. These budget items are not taken into consideration by lenders when you are preapproved for a loan. You should consider these expenses in your housing affordability analysis. You can make financial decisions based on your ability to afford the loan. The How Much House Can I Afford Calculator from Bankrate will assist you in calculating the numbers.
- How to reduce your monthly mortgage payment
- You can reduce the monthly payment if the monthly amount you see in our calculator seems a little too high. Try a few of the following variables:
- You can choose a longer-term loan. However, you will pay more interest over the loan’s life.
- You will pay less for your home.
- You can avoid PMI. A downpayment of 20% or more (or equity in the case of refinancing) will get you out of the private mortgage insurance.
- You can shop for a lower rate of interest. However, some rates will require that you pay points upfront.
- Increase your down payment. This will reduce the amount of the loan.
- Next steps
- The mortgage calculator can help you calculate your monthly mortgage payment and explain what it entails. The next step is to look at the numbers.
- A mortgage lender will preapprove. This is essential if you are looking for a home.
- Apply for a mortgage. Once your credit, employment, and financial information have been verified by a lender, you will be able to determine how much money you can borrow. A lender will give you a better idea of your ability to borrow money.
- Alternative uses for the mortgage calculator
- A mortgage calculator is used most often to calculate the monthly payment for a new mortgage. However, it can also be used for other purposes.
- These are just a few of the other uses.
- You are planning to pay your mortgage early.
- Bankrate’s mortgage calculator has an «Extra Payments» function that allows you to see how you can reduce your term and save money over the long term by making extra payments towards your principal. These extra payments can be made monthly, annually, or one time.
- Click the «Amortization/Payment Schedule» link to calculate your savings. Enter a hypothetical amount in one of the payment categories (monthly or yearly), then click «Apply for Additional Payments» for an estimate of how much interest you will end up paying and the new date that you will pay.
- Determine if an ARM is worth the risk.
- An adjustable-rate mortgage (or ARM) can offer a lower initial interest rate. This can be attractive. An ARM might be right for you, but it may not work for you.
- Enter the ARM interest rate in the mortgage calculator to get an estimate of how much you will save. Leave the term at 30 years. Compare those payments with the monthly payments for a 30-year fixed-rate mortgage. This will confirm your initial expectations about the benefits of an ARMS or help you to see if the risks are worth the gains.
- Learn when to stop private mortgage insurance.
- To determine when your home will have 20% equity, you can use our mortgage calculator. This is the magic number to ask a lender to waive its private mortgage insurance requirement. To offset the lender’s risk, if you have less than 20% down on the house you purchase, you will need to pay an additional monthly fee in addition to your regular mortgage payment. This fee is eliminated once you have 20% equity. That means you will have more money in your pocket.
- Enter the original amount and date of your mortgage, then click «Show amortization schedule.» To find the time when you will reach 20% equity, multiply your original mortgage amount by 0.8.
- Terms Explained
- An online mortgage calculator will help you predict your monthly mortgage payments quickly and accurately with only a few details. You can also see the total interest you will pay over the term of your mortgage. The following information is required to use the calculator:
- Home Price – This is how much you can afford to buy a house.
- Downpayment – This is the money that you pay to the seller of your home. Mortgage insurance is usually avoided if you have at least 20% down.
- Loan amount If you are applying for a mortgage to purchase a home, subtract your down payment from the price. This number is the remaining balance on your mortgage if you are refinancing.
- The length of your mortgage term (in years) If you are buying a house, you may choose a 30-year mortgage loan. This is because it offers lower monthly payments and stretches the repayment period over three decades. A homeowner refinancing their home might choose a loan with a shorter repayment term, such as 15 years. Another common term for mortgages is that it allows the borrower to save money by paying lower total interest. The monthly payments on 30-year mortgages are lower than those on 15-year loans, which can make it more expensive for the household budget, particularly for first-time homebuyers.
- Interest Rate – Calculate the interest rate for a new mortgage loan by looking at Bankrate’s Mortgage Rate Table in your area. Once you have the projected rate (your actual rate will be different depending upon your credit and financial situation), you can enter it into the calculator.