Home Loan Calculator

Preparing to buy a home is a very exciting and scary undertaking. Whether it is your first home or not, the prospect of something new and exciting is an adventure but the reality of a mortgage can be overwhelming. Before you start fantasizing about your dream home, it is a good idea to use a home loan calculator to help you get a grasp of the budget that will be involved in your home ownership.

Reasons to Use a Home Loan Calculator

Although it is easy to perform basic math with a pen and paper or even a computer, home mortgages are anything but basic. There is much more involved in a home loan than a down payment and a monthly mortgage expense.

Depending on how much of a down payment you can afford, you may need to pay for Private Mortgage Insurance (PMI). PMI is added to your mortgage if you are unable to pay a minimum of 20% down on the home that you are buying. PMI is insurance money that is non-refundable and does not count toward your principal or interest. While it is a great feature for those who want to buy a home but cannot yet afford to make a down payment of 20%, it can add a lot of cost to your overall mortgage premiums. A home loan calculator can help you assess your down payment requirements.

Principal is relatively easy to understand. If you borrow $100,000 for your home, then you owe $100,000 in principal. You can easily calculate 100,000 divided by 30 years (360 months) to come up with a monthly payment ($277.77), but that is not how mortgages are calculated. Interest always comes into play with a mortgage, and interest can be tricky to calculate.

Typically, an interest rate gets quoted as an annual rate with a monthly calculation. This means that a 5% (.05) annual rate gets divided by 12 months of the calendar year, equaling .004. The .004 then gets multiplied by the amount you borrowed ($100,000) to determine the interest amount you will pay each month. In this case your monthly payment would be $400 for your mortgage interest. This is not your total monthly payment; you still need to add your principal payment and any PMI and/or escrow to come up with your monthly mortgage amount.

Now for the tricky part, the above monthly interest calculation will not actually be $400 per month. This is because in the above example we calculated the rate based by the amount borrowed. However, unless you have an interest only mortgage, you will be applying principal to your balance every month, lowering your balance and therefore lowering your monthly interest calculation. To complicate things a little further, throw in an amortization schedule to see how much of your monthly payment is actually going towards interest and how much is applied toward principal.

So, as you can see, using a home loan calculator can remove a lot of the mystery that surrounds home loans. It can also help alleviate your anxiety about mortgages by calculating what you need and what you can truly afford before you actually sign on any dotted lines or even start house shopping.

Home Loan Calculator Calculations

Home Loan Calculators can help determine a variety of monetary questions related to mortgages and refinancing. Depending on your situation, you may need to consult a variety of home loan calculators to try different options and to calculate all scenarios.

Some home loan calculators can help you determine how much income you need for the mortgage you are considering or how much of a mortgage you can afford on your current income. You can even use a home loan calculator to help you decide if you are ready to buy a house or are better off renting for a while longer.

When it comes to determining what type of mortgage you should consider, it is a good idea to calculate as many different scenarios as possible. There are interest only mortgage calculators, calculators to factor balloon mortgages, fixed rate calculators, adjustable rate calculators, APR calculators, and even more calculators with variations of the aforementioned. By using diverse options on our various mortgage calculators it will help you see all of your different options and give you an idea of what your mortgage will realistically look like. Some mortgage options seem like a great idea for the first couple of years but then seem like pending doom for the remainder of the mortgage. Review all of your choices so that you can move forward with greater confidence on such a big decision.

You can even use home loan calculators to determine the cost difference between points and a down payment over the course of the loan. The length of the loan also makes a substantial difference, and you might be surprised to find that you can afford a 15 year mortgage with a smaller interest rate, instead of a 30 year mortgage with a higher interest rate. A home loan calculator can help you figure out if that’s the right choice for you.

If you are thinking about refinancing, a home loan calculator can help you factor how much money you could save by refinancing at a lower rate. You can also try different cash out options for a refinance to see if taking out extra cash to pay off other debts is a financially sound decision.

Using a Home Mortgage Calculator

Home loan calculators are easy to use and really just require the entry of some basic data. Depending on what type of calculation you need the data will vary, but you can usually start getting some basic numbers with just your income amount, a projected interest rate (best based on current geographical standards), and an idea of the amount you need to borrow or refinance.

Other types of information that may be useful are the age of the home and the appraisal of the home. If you don’t have a current appraisal, you can get an idea of the value of the home based on similar real estate listings in the area.

When you are reviewing your home loan calculations, don’t forget to take PMI and Escrow into consideration. As mentioned earlier you only need PMI if you plan on making a down payment of less than 20%. However, everyone will need to either pay an escrow account for real estate taxes and homeowners insurance or at least plan on putting this money aside on an annual or semi-annual basis. These costs can sometimes be a substantial part of home ownership and need to be calculated ahead of time so that they are part of your overall mortgage budget.

If you are buying your first home, purchasing your second home, or refinancing your current home, a home loan calculator can help you decide if you are on the right path as well as help you determine the most practical choice for you. While a home loan calculator does not have final say in what happens to your mortgage, it can give you the knowledge and power to proceed with confidence on your new journey.

Calculate Your Home Loan Rates!

Simply enter your information in on the top of this page to view instant calculatotions from the home loan calculator and then enter your state and type of mortgage desired to start comparing home loan rates online for free!