Mortgage
October 6, 2020

How to Use a Mortgage Calculator

When you’re researching home loans, mortgage calculators can be very helpful tools for figuring out how much home you can afford. They can give you an idea of what your monthly payments could look like, while taking things like home price and down payment into account. We’re breaking down mortgage calculators, so you know exactly how to use them to help you make your home financing decisions. Our mobile app provides useful mortgage calculators you can use straight from your phone. Plus, don’t forget our Loan Originators are available to assist with these calculations or answer any questions if you ever get stuck.

Consider Home Prices

Even if you already have a house in mind, the listing price isn’t a always what you end up paying for it. Take some time to make a good guess of what your home price could be. Remember, it’s always a good idea to round up.

Determine Your Down Payment

An important piece of using a mortgage calculator is figuring out how much money you can put toward a down payment. This will help you get an idea of how much you will need to finance. Some mortgage programs have certain amounts required for a down payment, while others allow for low or no down payments. Keep in mind that having a higher down payment of at least 20% can get you out of having to pay for mortgage insurance. A higher down payment also means you’ll be borrowing less and, therefore, paying less in interest.

Decide What Kind of Loan Term You’re Looking for

The length of your mortgage term and how long you’ll have to pay it is determined by your Loan Term. Loan Terms can come in different sizes, but typically they will be either 15 or 30 years. This is a key factor in using a mortgage calculator because it determines the size of your monthly payments. The longer you take to pay your mortgage off, the smaller the monthly payments will be.

Research Current Interest Rates

The interest rate portion of your loan is how the lender makes their money. Interest rates are changing all the time and depend on a variety of different factors, including your credit score. Interest rates are expressed in yearly percentages. A 4% interest rate means you’ll pay 4% of your loan balance as interest to the lender for every year of your loan term. As you lower your principal, the amount you pay in interest decreases, and more of your payment will go toward that principal rather than the interest. You can see this with an amortization schedule, included in our mortgage calculator.

Remember to Keep Property Taxes and Insurance in Mind

Not all calculators take these aspects into account, but things like property taxes and mortgage insurance affect your mortgage payment. If these factors aren’t included in the calculation you’re doing, make sure to leave some room in the budget for them.

Using a Mortgage Calculator

Now that we’ve broken down the different aspects of a mortgage calculator, simply plug your numbers in and see what results you get. This will give you a good idea of what to expect for a monthly payment, and may help you decide if you are ready to buy or if you need to adjust your expectations and plans one way or another. Find out what your total household income is, consider your current monthly debt, and try to factor in how a mortgage payment will fit into this. You can even write up a pretend-budget, just to get the feel of what you’ll be doing.

When you’re ready, make sure to use one of our helpful mortgage calculators on our website or in our mobile app to give you an idea what your monthly payments could look like and how much house you can afford. And don’t forget to reach out to us if you have any questions. Our Loan Originators are always available to walk you through calculations, the mortgage process, or any questions you may have.