A mortgage calculator helps home buyers and others estimate their monthly mortgage payments based on several factors including the amount of the loan, loan term, interest rate and other fees. It also helps borrowers decide whether to pay off their mortgage early, a strategy that can help save on interest.
Basic Components of a Mortgage Calculator
The first component of a mortgage calculator is the loan itself. A mortgage is the sum of the purchase price (plus any down payment), plus interest charges and other costs, such as private mortgage insurance and property taxes. It’s usually secured by real estate, such as a home, apartment or condominium.
Typically, the loan term is 30 years. Shorter terms, like 15 years, require higher monthly payments, but may help you save on interest and pay off the loan more quickly. Longer terms, on the other hand, often involve lower monthly payments, but will take longer to pay off the loan.
Interest Rates – A mortgage typically has two types of interest rates: fixed and adjustable. A fixed rate is the one that stays the same for the entire loan term, while an adjustable-rate mortgage (ARM) changes over time, allowing you to choose a lower initial interest rate, but potentially exposing you to the risk of losing money should market rates fall.
Down payment – This is the amount of cash you will put down on your home. It can be a percentage of the purchase price or a specific amount. Choosing a lower down payment will reduce your interest rate, but may require you to pay for private mortgage insurance. Once you have 20 percent equity in your home, the fee usually goes away, reducing your monthly payments.
Additional Home Costs – A good mortgage calculator will factor in other associated home costs, such as property taxes, insurance and homeowners association fees. These costs can make it difficult for homebuyers to determine the home price they can afford, so using a mortgage calculator can help them get a better idea of what they can realistically afford.
Mortgage Options – The mortgage calculator will show you how to compare your options for a fixed or adjustable-rate mortgage, including the advantages and disadvantages of each. You can also find out how to calculate your monthly payments with different prepayment methods, such as extra payments or accelerated payments.
Our mortgage calculator is easy to use and can be used for a variety of purposes, from estimating your monthly mortgage payment to planning for a mortgage payoff. By comparing your options, you can make the best choice for you and your family. If you have any questions, feel free to contact us. We’ll be happy to help you find the right mortgage for your needs!