Mortgage Calculator

 

 

Better Estimate’s Mortgage Payment Calculator

 

Investing in a home is a major milestone in one’s life that definitely calls for a celebration. However, the technical aspects of the process, such as financing a property, can be quite daunting. Before signing on the dotted line, or even beginning the process of house-hunting, there are a number of things that you will need to carefully consider. The two main questions that will need to be answered during the process are, “What costs are involved?” and “Am I going to be able to afford it?” Better Estimate’s Mortgage Payment Calculator has been designed to help you as you figure out what works in favor of your best interests.

 

Deciding On A Mortgage Loan

 

A mortgage is essentially a loan that a borrower is granted from a lender to buy a home. Taking out a mortgage allows you to purchase a property even if you aren’t able to pay the full price at once. Based on the home price you set up monthly payments. These are decided with the mortgage rates. The property that is subsequently purchased acts as collateral in the agreement and can be foreclosed should the borrower fail to make their monthly payment. Deciding on a mortgage loan can be an intense process as there are many aspects that need to be clearly understood before making your decision. It’s definitely a good idea to look into what different lenders are offering. This will give you a better understanding of what to expect and you’ll be able to make a well-informed decision.

Using the Mortgage Payment Calculator, you can get an estimated monthly mortgage payment in just a couple of quick and easy steps. You can also adjust the values (as many times as you’d like) to compare your options and determine what would work best for you. Our tool is simple to use and gives you the information you need to help decide on your next move.

 

Tips to kick-start the process:

1. Use a mortgage calculator to help you determine your affordability.
2. Speak to a financial adviser about your financial goals and priorities.
3. Chat to a couple of different lenders to find out your options.
4. Compare your options to find out what works best for you.

 

 

Would you like to use our Mortgage Payment Calculator? Keep reading to find out everything you need to know about how to calculate your monthly mortgage payment.

 

Mortgage loan payments do not only consist of a monthly payment of your total loan amount. There are other fees that are added on as well. Homeowners may be required to pay property tax, homeowners’ insurance and private mortgage insurance. Property insurance and homeowners’ insurance can be managed by your lender and added to your monthly payment. Purchasing private mortgage insurance can sometimes be a condition to a mortgage loan. Homeowners are also required to pay homeowner’s association (HOA) fees, and origination and lender charges. Lender charges usually consist of costs such as administrative and processing fees.

These are the figures you’ll need to get started:

1. Years of Mortgage
2. Rate of Interest (%)
3. Loan Amount ($)
4. Annual Tax ($)
5. Annual Insurance ($)

 

Using those figures listed above, our calculator will reveal your PITI (Principal, Interest, Taxes, and Insurance) amounts as well as your monthly payment tailored specifically for you:

1. Principal and Interest
2. Tax
3. Insurance
4. Your Monthly Payment

 

Mortgage Calculator

 

If you’ve spotted your dream home and are not sure whether you’d be able to meet the total monthly payment, you’ve come to the right place! The main objective of using a mortgage calculator is to help you determine your property financing affordability. A mortgage calculator is a valuable tool that should be made use of when deciding on purchasing a home as it will estimate your monthly mortgage payment for you. It’s an invaluable asset to those on the path of homeownership that helps people find their perfect mortgage match.

Our Mortgage Calculator has been designed to keep the process straightforward and simple. By the end of the process, you should be able to determine the total monthly payment you’re able to contribute towards your mortgage as per your affordability.

 

How To Calculate Your Estimated Monthly Payment

 

You can input your figures into the calculator by applying the following steps:

1. Years of Mortgage Loan: Slide the bar across the field range to select any figure between 1 and 40 years.
2. Rate of Interest (%): Slide the bar across the field range to select any percentage (%) between 1 and 10.
3. Loan Amount: Type in or use the arrows to display your loan amount in US Dollars.
4. Annual Tax: Type in or use the arrows to display the tax amount you pay annually in US Dollars.
5. Annual Insurance: Type in or use the arrows to display the insurance amount you pay annually in US Dollars.

 

Once you’ve hit the “Calculate” button at the bottom of the mortgage calculator, a list of figures that determine your final estimated monthly payment will load instantly.

 

Here’s a breakdown of what the calculated figures mean:

1. Principal and Interest: A compound figure depicting your monthly principal mortgage payment to your lender in addition to your monthly interest payment.
2. Property Tax: Your monthly property tax payment.
3. Homeowners Insurance: Your monthly homeowners’ insurance payment.
4. Your Monthly Payment: The final estimated monthly payment.

 

Term Length

 

The term length of your mortgage refers to the length of time over which you’ve decided to pay your mortgage as per the lender and their conditions, which you would’ve agreed to. Loan term lengths can vary from as short as 6 months or as long as 30 years. Your mortgage loan term can be classified as short, medium, or long and can range from approximately 15 to 30 years. The most common loan term lengths are short and long-term.

When choosing a mortgage loan term length, it would be beneficial to take into consideration the following:

 

Short loan term lengths: 

• You save on interest and pay less in total as a result.
• Your monthly mortgage payment may be a large amount.
• You’ll be able to pay it off quicker.

 

Long loan term lengths:

• Your monthly payment amount isn’t as high as your payments will be spread out over a long period of time.
• Your total interest paid will be higher because of the extended time period, and as a result, you’ll be charged more overall.
• It would take you longer to pay off.

 

The general trend is that the higher the number of years of the loan, the higher the overall cost (and monthly payment). Vice versa, the lower the number of years, the lower monthly overall and monthly cost.

 

Interest Rates

 

Your mortgage interest rate is the rate at which your lender will charge you interest in exchange for borrowing the money to purchase your property. Interest rates are determined by a number of factors and lenders can set either a fixed rate or a variable rate that can fluctuate. When considering a mortgage loan, homebuyers may choose to follow the lowest average rate offered by banks which is called the prime rate.

 

How do lenders decide on borrowers’ interest rates?

 

When settling on an interest rate, lenders take into consideration a number of factors:

• loan type
• credit score
• where your property is located (ie. zip code)
• your debt-to-income ratio

Your credit score and debt-to-income ratio are the most important factors that lenders prioritize when handling your application. These reflect your financial history and whether you’ll be able to manage the addition of a monthly mortgage payment in light of your current expenses and monthly income. Before granting you approval, it is important for lenders to know whether you’re capable of repaying the loan. You are more likely to be granted a lower interest rate if you have a higher credit score. The opposite of this is also true: if you have a lower credit score, you are more likely to be granted a higher interest rate.

When deciding whether or not you should be granted the mortgage loan, lenders will ask you for pieces of evidence indicating your financial history, such as:

• Credit scores
• Tax returns
• Proof of employment
• Bank statements
• Investment statements (such as those pertaining to retirement policies)

 

There is an element of risk involved for mortgage lenders, which is why it is typical for them to stipulate a higher rate for borrowers who are considered to be of high risk. A higher rate safeguards the lender in the event of a borrower defaulting as they will be able to recoup the loan amount over a shorter period of time. Thus, the deciding factor is often based on how much of a risk you pose to the lender.

The overall loan amount is heavily influenced by the mortgage interest rate. It is advisable to secure the lowest rate afforded to you in order to keep your overall loan amount to a minimum (Tip: shop around to see what 3 or 4 lenders have to offer).

 

 

How much can I afford?

 

Before putting yourself out there into the real estate market, it is important to take stock of what you can actually afford. By determining your affordability at the outset, you can limit your expectations and begin the house-hunting process with a clear understanding of your options. This will help you save time and prevent disappointment in the event of you falling in love with a house that is above your budget.

Your overall mortgage cost is dependent on a number of factors, such as:

• The mortgage term length (How long have you decided to pay your mortgage over?)
• The type of mortgage loan
• The interest rate stipulated by your chosen lender (This is heavily influenced by your qualifications, such as your credit score, as well as the type of product you’re interested in)
• The purchase price of your house.

 

Things to consider:

1. How much does your monthly household income amount to?
2. How stable is your career? (ie. are there any known risk factors that may prevent you from being able to complete your mortgage payments?)
3. Have you factored in your monthly expenses, such as transport and student fees?
4. How much are you willing to spend on a monthly mortgage payment?
5. Have you implemented a plan to save money for unexpected expenses, such as your vehicle needing to be repaired? A good rule to follow is accumulating 3 months’ worth of expenses that you could tap into should you encounter any unexpected financial constraints.
6. Have you accounted for the funds you’d need for an initial deposit on a house? Bear in mind that if your down payment amounts to less than 20% of the loan, you may be required to pay private mortgage insurance (this refers to insurance for lenders should you fail to pay).

 

How Much Will My Monthly Payment Be?

 

Your monthly payment will be calculated using your mortgage term length, interest rate, principal loan amount, tax and insurance.

The basic formula would be:

Monthly Mortgage Payment =

[principal per month+ interest per month + tax payable per month + monthly insurance]

Use the Mortgage Calculator to estimate your monthly mortgage payment (removing the stress out of having to do your own calculation).

 

The Difference Between Fixed and Adjustable Rate Mortgages

 

Fixed-Rate Mortgages

A fixed-rate mortgage, which is a more traditional model, refers to one that is bound by a set interest rate throughout the duration of the mortgage term length. This type of mortgage differs in comparison to others in that the rate does not fluctuate according to market conditions.

Fixed rate mortgages would be best suited to borrowers who prefer consistency and predictability. Your mortgage payments will remain the same from the time you get approved for your mortgage until your final payment.

Adjustable-Rate Mortgages

An Adjustable-Rate Mortgage (ARM), also known as a floating or variable-rate mortgage, refers to one that only has a fixed interest rate during the initial portion of the full term length. Once that time period has passed, the interest rate undergoes periodic resets. This may be annually or monthly. As a result, interest payments on the outstanding balance of the mortgage will differ either annually or monthly, as per the rate set out following resets. ARM caps ensure that there is a limit to how much the interest rate can increase either annually or throughout the duration of the mortgage term length.

The fluctuation of the interest rate following the initial fixed period is determined by an index and a set margin. Some of the most common indexes used are:

• the maturity yield on one-year Treasury bills,
• the 11th District cost of funds index
• LIBOR (the London Interbank Offered Rate)

 

Essentially, the only difference between these 2 types of mortgages is the manner in which interest is calculated.