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The Ascent's mortgage affordability calculator with PMI, interest, and property taxes helps you understand how much a home loan will cost. It also makes it easy to compare loan options. To use the calculator, plug in:
You can also add the cost of home insurance, property taxes, and homeowners association (HOA) fees, if you know them. This can give you a more accurate estimate and help you with your home search.
A good mortgage payment calculator takes into account all the monthly costs that go into a mortgage payment. These costs are added together to estimate your total monthly payments as well as the interest you'll pay over time.
Here's how a mortgage rate calculator determines your payment amount.
This is the total home price, minus any down payment. Enter the price of the home you're interested in, as well as how much you're using as a down payment. If you are buying a $400,000 home and making a $40,000 down payment, the calculator subtracts $40,000 from $400,000 to determine that you are borrowing $360,000.
A mortgage payment can be broken down into four parts: Principal, interest, taxes, and insurance.
This calculator immediately figures out how much your principal and interest will run each month, based on a specific interest rate. A loan with a longer term typically has a higher interest rate, but the principal payment isn't as high each month as with the payment for a shorter-term loan, since you have longer to pay off the principal.
For example, if you borrowed $360,000 on a 30-year loan at 7.5%, your principal and interest payment would be $2,517. If you borrowed the same amount through a 15-year loan at 6.8%, your principal and interest payment would be $3,196.
If you're taking out a mortgage, the monthly payment consists of more than just principal and interest. You're also responsible for paying property taxes and homeowners insurance, both of which are added into your monthly payment. Some homeowners also pay a homeowners association (HOA) fee.
A mortgage affordability calculator can estimate these inputs based on the typical costs for a home in your price range, or you can provide exact details to get a more accurate estimate. For example, if your home insurance is $1,200 per year, your property taxes are $3,000 annually, and your HOA fees are $500 per year, this adds around $392 to your monthly payment.
If you've made less than a 20% down payment, private mortgage insurance (PMI) must also be included, which typically costs between 0.5% and 1.0% of your loan amount annually. For instance, if you're borrowing $360,000, you might pay between $1,800 and $3,600 for mortgage insurance.
Principal, interest, property taxes, HOA costs, home insurance fees, and PMI are added together, resulting in your total monthly payment. If you opted for the 30-year loan mentioned above, this would mean adding up:
The calculator would show your total monthly mortgage payment at $3,384.
It's important to understand all the inputs of a home loan repayment calculator to determine your monthly and total costs.
This is the amount you are paying for the home. If you've made an offer to buy a house for $400,000, the home price would be $400,000.
The down payment is the amount of money you put down on the property at closing. Ideally, this will be at least 20% of the home's purchase price because you can qualify for a more affordable loan and get a broader choice of lenders. Lenders do let you put down much less in some cases -- as low as 3%, or even $0 with certain loans (such as VA loans).
Your down payment is determined by the amount of cash you have available to put toward the home. If you have $40,000 available for this use, you'd be putting 10% down on your $400,000 loan.
The down payment is subtracted from the home's purchase price to determine the amount of money you borrow from your mortgage lender.
Interest is the rate you pay to borrow. Your interest rate is based on national averages and economic conditions, as well as individual financial credentials such as your credit score and your debt relative to your income. Your mortgage loan type and choice of lender also factor into your interest rate.
The higher the interest rate, the more financing charges you pay your lender over time. A higher rate also leads to larger monthly payments.
Often, in addition to your interest rate, you'll see something called "annual percentage rate," or mortgage APR. A mortgage APR is the yearly cost of borrowing money. It includes your interest rate, but also fees your lender may charge, all rolled into one rate.
Mortgage lenders require you to have private mortgage insurance (PMI) when your down payment is less than 20% of your home's value. The amount you pay depends on how much you borrow, but its annual premium is typically between 0.5% and 1.0% of your home loan.
There are several kinds of mortgages, including 30-year, 20-year, and 15-year loans. Your loan type affects monthly payments and total costs.
A loan with a longer payoff time typically has a higher interest rate. Since you pay more in financing charges and pay interest for longer, it's more expensive than a loan with a shorter payoff period. However, the monthly payments are lower than a shorter-term loan. Because you aren't making as many payments, loans with shorter payoff times have higher monthly payments -- despite the lower rate and lower total costs.
Homeowners insurance is required by lenders. Lenders require this because the home serves as collateral for the loan. The cost to insure a property is based on many factors, including its value, the type of insurance, and the level of risk. For example, homes in an area prone to earthquakes typically cost more to insure. The same is true of homes in areas prone to mudslides or on floodplains.
It's a good idea to compare insurance quotes from several carriers to find the most affordable coverage. Rates can vary dramatically, particularly after you factor in the variety of discounts offered by insurers.
Lenders typically collect monthly payments (as part of your overall mortgage payment) for home insurance and keep the money in an escrow account. For example, if your insurance is $1,200 per year, your insurer adds $100 onto your mortgage payment. The money is kept in a special account, then your insurance bill is sent to your lender, which pays it out of that account annually.
Property tax is paid to local and state governments. The amount of property tax depends where you live. It's usually expressed as a percentage of your home's value. Property tax payments are also collected by your lender as part of your monthly mortgage payments and put into escrow until your lender pays your property tax bill once per year.
If your home is part of a homeowners association, then HOA fees are factored into monthly housing costs as well. HOAs collect dues to maintain common areas and provide other services.
While paying funds into escrow raises the total due each month, it removes the headache of trying to come up with the money to pay insurance, taxes, and HOA fees when those bills come due.
Our simple mortgage calculator can help you make informed decisions about your loan, including:
If you get quotes from several mortgage or refinance lenders, you can also use our mortgage affordability calculator above to view the true cost of each loan.
The results of a mortgage repayment calculator can help you determine how much a particular loan will cost each month. Using the calculator, you can compare loan types and determine, for instance, if you prefer a 15-year or 30-year loan, based on total costs and monthly payments.
You can also make sure the mortgage payments fit into your budget. If your total payment would be $3,384 with all costs added in, you can assess whether this is a comfortable amount to pay.
Generally, a mortgage payment should never exceed 28% of your monthly take-home pay. Let's say you bring home $6,000 per month -- 28% of $6,000 is $1,680. That means that your mortgage payments, including principal, interest, taxes, insurance, and HOA should not be more than $1,680.
After using the mortgage loan calculator, you're ready to make informed choices about home buying. Consider taking these next steps.
Work on improving your financial credentials to increase the odds you can qualify for a mortgage loan at a competitive rate. This could mean paying down debt or improving your credit score.
You can use a simple mortgage interest calculator to decide if you want a 30-, 20-, or 15-year loan based on the monthly payments and total loan costs for each loan type.
Apply with several lenders to get preliminary rate quotes. You can input the interest rates and terms each lender offers into the calculator to see which lender offers the best loan.
After narrowing your options to one lender, submit your financial information to complete the pre-approval process. Lenders will assess your details and tell you how much you can borrow, at what rate. You'll lock in your loan rate during this process.
While you aren't 100% guaranteed to get the loan you're pre-approved for, you should get final approval under the agreed-upon terms as long as nothing changes financially, and the home you're buying is approved by the lender.
After getting pre-approved, you can make an offer on a home. When that offer is accepted, you'll go through the appraisal and inspection process. Once the home checks out and your lender reviews your financial credentials again, you close on your home loan.
To qualify for a mortgage or refinance, shop around with several lenders. When you find the best rates and terms, make sure you meet the lender's requirements for income, debt, and credit score.
You'll then provide information on your finances, so gather documents such as pay stubs and bank statements. Once you've found the right loan and have your paperwork ready, submit an application. For more information, or if you're ready to go, use our form to guide you through the process and get a mortgage pre-approval.
Yes, although it won't be as simple as landing a loan with a strong credit history. Most lenders look at your credit report and score when determining if you qualify for a home loan. However, some lenders work with borrowers who don't have a credit history. They can review other documentation, such as utility statements, showing you have a history of making on-time payments.
Shop around for a lender that does manual underwriting and prepare financial documentation such as bank statements. Find out more in this guide to how to buy a house with no credit.
Your monthly mortgage payment includes:
A simple mortgage calculator with taxes and PMI can tally these up and give you a hypothetical mortgage payment. You could also use a mortgage amortization calculator or amortization schedule to give you a sense of how much interest you'll pay over time.
The type of mortgage you should choose depends on many factors, including your credit history, your down payment amount, the type of house you're buying, and your goals for your loan. For example, you may wish to choose a:
These are just a few examples of different home loans. Research all the mortgage types before you decide. For example, if you're purchasing a fixer-upper and want to borrow enough money to cover both the home and the cost of upgrades and repairs, look into a conventional, FHA, or USDA rehab loan.
To begin the process of buying a home, set a budget to ensure you're prepared to qualify for a home loan and pay a mortgage. Prepare the financial documents that mortgage lenders will want to review. Get quotes from several lenders, and pursue mortgage pre-approval from the one offering the best terms.
You may want to hire a real estate agent to help you shop for properties. When you find a home that fits your budget and criteria, make an offer, including any contingencies or conditions that must be met, such as a satisfactory inspection. Complete the formal loan approval process for the mortgage loan that best fits your needs, and close on your transaction.
This home buyer checklist provides more insight into each of these steps, so check it out before you shop for a property.
Ideally, you will make a down payment equal to 20% of the value of the property. So if you're buying a $400,000 home, save $80,000.
However, many people don't save this much for a down payment. You could qualify for a conventional loan (not backed by the government) with as little as 3% down. Some government-backed loans don't require a down payment at all. But if you don't make a down payment or make a small one, expect to pay mortgage insurance or other upfront fees.
Whether you plan to save 20% or not, look into how to save for a down payment.
To apply for a mortgage, you need:
Lenders may also request additional information, so read more details in our full guide to what documents are required for home loans.
Expenses of homeownership to prepare for include:
You can learn more about all these costs in our guide to homeownership expenses.
With a 15-year loan, you make payments for just 15 years, as opposed to 30. The monthly amount you owe is higher on a 15-year loan than a 30-year loan because you make fewer payments. The interest rate is usually lower on a 15-year loan. And total interest costs are lower, because you pay interest for less time.
The "sweet spot" is the loan term that allows you to pay the mortgage off as quickly as possible without cutting your budget short each month.
Some of the best tips for first-time home buyers include:
For more information, look at our first-time home buyer tips.
Lenders consider your debt-to-income ratio when you apply for a mortgage because they want to know you can afford mortgage payments. They look at your:
If either ratio is too high, a lender won't approve your loan. For more information about lender requirements, read up on debt-to-income ratio and why it matters.
A higher credit score can result in a lower mortgage rate, since lenders view you as a low-risk borrower. A lower mortgage rate means lower monthly payments and less total interest paid over time.
A credit score on the low end can make it difficult to get approved for a loan. And lenders that do approve a mortgage will charge a higher rate. That's because credit problems suggest a greater chance a borrower will default on a loan.
Find out more about this by looking into how credit scores affect mortgage rates.
If you want to uncover more about the best mortgage lenders for low rates and fees, our experts have created a shortlist of the top mortgage companies. Some of our experts have even used these lenders themselves to cut their costs.
We're firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.
Please note that this calculator is not personalized financial advice and should not be considered or used as such. Nor are we promising that by use of this calculator, will you be able to save more money, preserve wealth, or otherwise.
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