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Mortgage Calculator

Mortgage Calculator

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🗓️

Updated: March 04, 2024

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If you're in the market for a new home or considering a money-saving refinance of your existing mortgage, it's crucial to understand the potential costs of your future loan. Our easy-to-use mortgage calculator is designed to provide you with the insights you need for your borrowing journey.

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How to use the mortgage calculator

Our mortgage calculator considers three elements: the initial amount of your loan, also known as the principal; the lender’s interest rate; and the overall number of payments you need to make to fully repay your loan. Just enter this information and we’ll do the calculations for you. If you’re in the market for an online lender, check out our list of the best online lenders

How a mortgage calculator can help you

A mortgage calculator is an incredibly useful tool. It allows you to calculate the total amount you will end up paying over the duration of your loan and provides detailed monthly payment estimates. These estimates are based on the projected sale price, your down payment and the interest rate. Moreover, it offers a price range for you to consider, enabling the comparison of payments across various loan types.

What typical costs are included in a mortgage payment?

Your monthly payment usually consists of four components:

  • Principal, which is the amount you borrowed and need to repay.
  • Interest, which is the main expense associated with borrowing money, but it's not the only one.
  • Mortgage insurance
  • Property taxes and homeowners' insurance

ADD ARM vs Fixed rate mortgage calculator

Mortgage payment equation

Monthly Payment = (P × r) ∕ n

In this equation, "P" stands for the principal amount, while "r" denotes your Annual Percentage Rate (APR). The "n" value corresponds to the number of payments you'll be making annually.

Deciding how much house you can afford

Wondering how much you should put down on a house? The majority of financial advisors recommend a conventional home affordability rule known as the 28/36 percent rule. According to this guideline, individuals should allocate no more than 28 percent of their monthly gross income to housing costs and should limit their total debt payments to no more than 36 percent of their income. This rule serves as a fundamental baseline to determine what one can reasonably afford to pay each month.

How lenders decide how much you can afford to borrow

Typically, loan providers prefer your mortgage payment to not exceed 28% of your gross income. They’ll also look at your assets, debt, credit score and job history. Using this information, they’ll decide the maximum amount they are prepared to lend you. Check mortgage rates to see if buying a home is within your budget. Your debt to income ratio will tell lenders all about your borrowing capacity. And depending how much you have saved and how much you make, you can choose a 30-year, 15-year, 10-year or 5-year amortization.

How to reduce your monthly mortgage payment

The majority of people find housing to be their largest monthly expenditure. If your mortgage is consuming a significant portion of your budget, you might be seeking methods to decrease your payments. Fortunately, there are options available — many of which are straightforward and economical. Here are five strategies you can use to lower your monthly mortgage payment.

  1. 1.

    Opt out of mortgage insurance: For those who have a conventional mortgage and made a down payment less than 20% during the purchase of their home, you are likely paying for Private Mortgage Insurance (PMI), which is an additional charge that the mortgage company includes in your total monthly payment. Depending on the size of your loan and your credit score at the time of the home purchase, PMI could increase your monthly expenditures by hundreds of dollars. However, the silver lining is that it's possible to eventually eliminate PMI by accumulating enough equity in your home. 

  2. 2.

    Recast your loan: Recasting your loan involves making a substantial one-time payment towards your loan balance. The lender then re-amortizes your mortgage, reducing the balance while keeping the other loan terms unchanged. This leads to you owing less interest and having lower monthly payments.

  3. 3.

    Shop around for home insurance: It's important to get quotes from several companies and compare them. Also, consider factors like the quality of the carrier’s customer service and their reliability.

  4. 4.

    Mortgage modification: In case of a significant life event like job loss, you might be eligible for a mortgage loan modification. This program adjusts your home loan terms to prevent foreclosure. It could involve reducing your interest rate, extending the repayment period, or even lessening the principal balance.

  5. 5.

    Refinance your mortgage: Refinancing is the process of replacing your existing mortgage with a new one on your property. The goal is typically to secure a lower interest rate, consequently reducing your monthly payments.

What types of home loans can be considered?

Let’s go over some of the types of mortgage loans available. 

Conventional loan

A conventional loan refers to any mortgage loan that isn’t insured or guaranteed by the government. These loans are available in various forms and, despite lacking some of the advantages offered by FHA, VA and USDA loans, they continue to be the most frequently utilized type of mortgage loan.

VA loan

The Veterans Affairs (VA) assists Veterans, Servicemembers and qualified surviving spouses in becoming homeowners. It offers a home loan guarantee advantage and other related housing programs. These are designed to support you in purchasing, constructing, repairing, maintaining, or modifying a home for your personal use.

USDA loan

The USDA home loan is a mortgage option that requires no down payment and is available to home buyers in certain towns and rural regions. These loans are backed up by the USDA Rural Development Guaranteed Housing Loan Program, which is a part of the U.S. Department of Agriculture. The absence of down payment requirements and often lower rates compared to traditional mortgages make USDA home loans an attractive choice, with the government assuming the associated lending risks.

FHA loan

An FHA loan, short for Federal Housing Administration loan, is a type of mortgage that is insured by the government and offered by an FHA-approved bank or lender. This type of loan often has lower requirements for down payments and credit scores compared to many conventional loans.

Jumbo mortgage loan

A jumbo loan is a type of mortgage that is utilized to fund properties whose cost exceeds the maximum limit for a conventional conforming loan. The Federal Housing Finance Agency (FHFA) has set the maximum limit for a conforming loan at $766,550 in most counties for 2024.

Amy Tokic Associate Content Editor (SEO)

Amy Tokic is an editor and writer based in Toronto. She’s worked at a slew of lifestyle-based publications and is passionate about saving money, as she’s putting her dogs through numerous obedience classes. Amy is obsessed with pets, and publishes content focused on not-so-perfect pets at ThatFluffingDog.com.

Disclaimer

The content provided on Moneywise is information to help users become financially literate. It is neither tax nor legal advice, is not intended to be relied upon as a forecast, research or investment advice, and is not a recommendation, offer or solicitation to buy or sell any securities or to adopt any investment strategy. Tax, investment and all other decisions should be made, as appropriate, only with guidance from a qualified professional. We make no representation or warranty of any kind, either express or implied, with respect to the data provided, the timeliness thereof, the results to be obtained by the use thereof or any other matter.