Mortgage loan calculator: How to use it

Compare the types of loans

The most popular loan terms are 30-year fixed-rate mortgages and 15-year fixed-rate mortgages. Depending on your financial situation, one date may be better for you than another.

With a 30-year fixed-rate mortgage, the monthly payment is lower, but you pay more interest over time. A 15-year fixed-rate mortgage has a higher monthly payment (as you’ll pay off the loan in 15 years instead of 30), but it can save you thousands of interest over the life of the loan.

loan term Fixed for 30 years Fixed for 15 years
Monthly payment $ 984 $ 1,454
Mortgage rates 4.25% 3.75%
Total interest paid 153,929 USD $ 61,451

Mortgage calculator

Use the Paydaychampion mortgage calculator to calculate your monthly mortgage payment, including principal and interest, taxes, homeowners insurance, and personal mortgage insurance (PMI). You can change your home price, down payment, and mortgage terms to see how your monthly payment changes.

You can also try our home furnishings calculator if you are unsure of your budget for a new home.

The calculation of our mortgage calculator

For those who want to know exactly how our calculator works, we will use the following formula to calculate the mortgage:

M = monthly payment

P = principal amount (beginning of loan balance)

i = interest rate

n = number of monthly mortgage payments for 30 years (30 * 12 = 360, etc.)

How to use our mortgage payment calculator

Mortgage details

The first step in understanding how much you pay each month is to provide general information about your prospective home and mortgage. There are three fields to fill in: the price of the house, the amount of the advance, and the interest on the mortgage. Select the loan term from the drop-down list. If you don’t have the exact numbers, don’t worry, use the best answer. Numbers can be changed at any time later.

Loan type drop-down menu

For a more detailed monthly payment calculation, click the Tax, Insurance, and HOA drop-down list. Here you can enter your residence, annual property taxes, annual home insurance, and, if applicable, monthly housing or HOA payments.

The price of the house

Let’s take a closer look. The number one home price depends on your income, monthly debt, creditworthiness, and prepayment savings. The 1% you may hear about when buying a home is the 36% rule. As a general rule of thumb, when applying for a mortgage, you should aim for a leverage ratio (DTI) of no more than 36% (or a maximum of 43% for an FHA loan). This report will help the lender understand your financial ability to pay off your mortgage each month. The higher the interest rate, the less likely you are to pay off your mortgage.

To find your DTI, add up all of your monthly debt payments, for example: B. Credit card debt, student loan, child or child support, car loan, and scheduled mortgage payments. Then divide by the monthly income before taxes. To get the percentage, multiply it by 100. The remaining number is your DTI.

DTI = Total Monthly Debt Payments ÷ Gross Monthly Income x 100

make a deposit

In general, most mortgage lenders expect a 20% down payment on a traditional unsecured mortgage (PMI). Of course there are exceptions. For example, VA loans don’t require a down payment, and FHA loans often only allow a 3% down payment (but with the mortgage insurance version). Some lenders also offer programs that offer prepaid mortgages ranging from 3% to 5%. The following table shows how the amount of the down payment affects the monthly mortgage payment.

How a larger deposit affects monthly payments *

percentage make a deposit The price of the house Main interest
twenty% $ 40,000 $ 200,000 $ 804
fifteen% $ 30,000 $ 200,000 $ 854
Ten% $ 20,000 $ 200,000 $ 905
5% $ 12,500 $ 200,000 $ 955
0% $ 0 $ 200,000 $ 1,005

* Payment is made solely in the form of principal and interest. For a total monthly down payment of less than 20%, add property taxes, home insurance, and mortgage insurance (PMI).

In general, most buyers should try to save 20% of the home price they want before applying for a mortgage. The ability to make a large down payment increases your chances of getting the best mortgage rate. Your creditworthiness and income are two additional factors that determine your mortgage rate.

Mortgage rates

In the Mortgage Rates field, you can see what qualifies you by using our Mortgage Rate Comparison Tool. You can also use the rate that your potential lender gave you when you went through the pre-approval process or spoke with your mortgage broker. If you have no idea what qualifies you, you can always set an estimated interest rate based on the latest interest rate trends available on our website or the lender’s website. Remember that your actual mortgage rate will depend on a number of factors, including your creditworthiness and debt-to-GDP ratio.

30-15 year loan comparison

loan term

From the drop-down list, you can choose a 30-year fixed-rate mortgage, a 15-year fixed-rate mortgage, or a 5/1 ARM. The first two options, as the name suggests, are fixed fast loans. This means that the interest rate and monthly payments will remain the same for the entire term of the loan. An adjustable rate mortgage or ARM has an interest rate that fluctuates after the initial fixed rate period. Generally, after the initial phase, the interest rate on the ARM changes once a year. Depending on the economic climate, your rate may go up or down. Most people opt for 30-year fixed rate loans. However, if you plan to move or return home in a few years, the ARM may offer a lower initial interest rate.

Understand your mortgage payments

Monthly mortgage payment = principal + interest + payment to an escrow account

Trust = Home Insurance + Property Tax + PMI (if applicable)

The monthly lump sum payable to the mortgage lender is divided into several parts. Most home buyers have trust accounts. The lender uses this account to pay for property taxes and home insurance. This means that the bill you receive each month for your mortgage covers not only principal and interest payments (money that goes directly into the loan), but also property taxes, home insurance, and in some cases, the safe. Mutual.

What is principal and interest?

Equity is the amount of the loan you borrowed and interest is the extra money you owe to the lender that accumulates over time and is a percentage of your original loan. Fixed-rate mortgages have the same principal and interest every month, but the actual numbers for each change change as your loan expires. This is called depreciation. Initially, you pay a higher percentage of interest than the principal. Gradually pay more principal and less interest. The following table shows an example of a $ 200,000 mortgage amortization.

Mortgage payment table *

Month of payment Principal interest Full payment
1 $ 303.90 $ 616.67 $ 920.57
60 (5 years) $ 364.43 $ 556.14 $ 920.57
120 (10 years) $ 438.37 $ 482.20 $ 920.57
180 (15 years) $ 527.30 $ 393.27 $ 920.57
240 (20 years) $ 634.28 $ 286.29 $ 920.57
300 (25 years) $ 762.96 $ 157.61 $ 920.57

* This table shows cancellations on a 30-year fixed rate mortgage of $ 200,000.

What is home insurance?

Home insurance is an insurance policy that you take out with an insurer that insures you against theft, fire or storms (hail, wind and lightning) in your home. Flood or earthquake insurance is usually a separate policy. Home insurance can cost hundreds to thousands of dollars, depending on the size and location of your home.

When you borrow money to buy a home, your lender requires that you have home insurance. This type of insurance will protect you from the lender (your home) in the event of a fire or other damaging event.

How does the property tax work?

If you own the property, it is subject to county and county taxes. You can enter your zip code or city name using our property tax calculator to see the actual average tax rate in your area.

Property taxes vary greatly from state to state and even county. For example, New Jersey has the highest average effective tax rate in the United States at 2.42%. However, if you own Wyoming real estate, you will only receive about 0.57% property tax. It is one of the lowest average effective tax rates in the country.

Although it varies by state, county, and city, property taxes are typically calculated as a percentage of your home’s value and collected annually. In some areas, a home is appraised annually, in others it can take up to five years. These fees are generally paid for services such as highway repair and maintenance, school district budgets, and county general services.

What is PMI

Private Mortgage Insurance (PMI) is an insurance policy required by lenders to guarantee a subprime loan. You will have to pay the PMI if you do not have a 20% down payment and do not qualify for a VA loan. The reason most lenders require a 20% down payment is due to equity. If you don’t have enough equity in your home, this is considered a potential default. Simply put, if you don’t pay enough for the home, you’re putting the lender at risk.

PMI is calculated as a percentage of the original loan amount and can range from 0.3% to 1.5%, depending on the amount of the down payment and credit worthiness. Once you have at least 20% of your capital, you can stop creating PMI.

What are the HOA fees?

Homeowners Association (HOA) commissions are often generated when purchasing an apartment or home that is part of a planned community. HOA prices are generally billed monthly or annually. The fee covers overhead costs such as maintaining a common area (for example, lawn, city pool, or other community facilities) and building maintenance. When listing properties, HOA prices are usually announced in advance so you can see how much current owners pay monthly or annually. HOA fees are a fixed additional fee that you must manage. In most cases, they don’t include property taxes or home insurance.

How to reduce your monthly mortgage payment

  • Choose a long-term loan
  • Buy a cheaper house
  • Make a larger donation
  • Find the lowest interest rate available

You can expect a lower bill as the years of your mortgage lengthen. This means extending the term of the loan. For example, a 15-year mortgage has higher monthly payments than a 30-year mortgage because it pays faster.

The obvious, but still important, path to a lower monthly payment is to buy a cheaper home. The higher the price of the apartment, the higher the monthly installments. It has to do with the PMI. If you haven’t saved enough for a 20% down payment, pay more each month to secure your loan. By buying a home for less or expecting higher prepaid savings, you can avoid two major monthly payments.

After all, your interest rate affects your monthly payments. You do not have to accept the first conditions that the lender gives you. Look for other lenders to find lower interest rates and keep your monthly mortgage payments as low as possible.

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Catriona

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