Investing in a home is a major life decision. While shopping around for the rates that best fit your budget and the lenders that appeal to your financial needs, figuring out what your prospective monthly payment will be is crucial to the process. With that in mind, we've created our home.loans calculator. It will help you figure out the monthly payments you'll need to make based on the loan program, loan amount, and interest rate.
The Purpose of the Home.Loans Mortgage Calculator
The mortgage calculator tool is especially useful after shopping around for lenders to get a better overview of the monthly payments associated with the rates that they offer for the selected loan program. The included amortization breakdown will help you to see the amount of interest versus the amount of principal you'll pay each month. You'll even be able to see how your payments are affected by real estate taxes, homeowners' association dues, and homeowner's insurance!
How to Use the Tool
To use the calculator, just enter the appropriate information in the designated fields, and the calculator will automatically show your monthly payment information. Planning for your future has never been easier!
Using the Information in the Mortgage Calculator to Your Advantage
Calculating monthly payments is good enough for budgeting purposes and understanding the cost of a home loan. But, the mortgage calculator tool can be your best friend throughout the entire home buying process. You can use it to your advantage for the following.
Creating Home Buying Strategies
The calculator's most basic purpose, to help see what future payments may look like, can be used as you see fit. In other words, the different inputs can be tinkered with to give you a better idea of your options. For example, you can change the loan amount to see if going over or under the asking price for a home still works with your budget.
Before actually choosing a home, you can use the calculator to determine which loan programs and interest rate ranges work best for you. Of course, while closing costs aren't factored into the calculation, you can see the impact of HOA fees, taxes, and insurance on each loan product, and the loan amount you're looking into. When devising home buying strategies, that information is priceless!
Comparing Loan Programs
Not all loan programs were created equal. The type of loan you choose directly affects your monthly payments. The key to a good mortgage deal is finding the loan program that's the most beneficial to your budget.
With our home loans calculator, you get to weigh each program against the others using the rates you've been offered, and the purchase price you have in mind. Easily compare the FHA 30-year fixed loan with a conventional 10-year fixed-rate mortgage, or the 10-year fixed-rate loan with the 10/1 ARM. Every penny saved counts, and going through the calculation for each applicable loan program could mean saving thousands!
Remember that when calculating monthly payments for the hybrid adjustable-rate mortgages, like the FHA 5/1 ARM, the rate is subject to change after the introductory period ends (i.e., after five years for the 5/1 ARM). This makes understanding prospective payments slightly harder. Make sure you consult with your lender about the interest rate caps for each adjustment as well as over the life of the loan.
If you have any questions about the various loan programs and how they work, don't hesitate to reach out to us. Our team of home loans specialists are standing by to answer any questions you may have!
Understanding Where your Money is Going
Knowing how much money you'll need to cough up each month is pretty good. But knowing why is even better. Our calculator breaks down your monthly payment so that you know exactly how it's divided each month. Besides the obvious principal and interest, our calculator includes the option to include HOA dues, homeowner's insurance, and even real estate taxes!
Most home loans are amortized, and knowing the ratio between principal and interest each month is important. The table included shows the amortization over the life of the loan, including the principal amount, interest amount, and resulting balance each month. Some homeowners choose to make larger payments toward the end of their loan term, and chip away more of the principal with each payment since the interest isn't as aggressive as at the beginning of the loan term.
Useful Mortgage Calculator Terms and Definitions
Not everyone is fluent in "homefinance-ese." But don't worry—we've got a little cheat sheet (read: glossary) of terms to help get you acquainted with all the fancy home buying lingo!
- Annual Percentage Rate – The actual cost per year of borrowing a sum of money, expressed as a percentage.
- Annual Property Tax – A tax paid to the local government of an area, based on the determined value of a property (including real estate) located within its jurisdiction.
- Asking Price – The amount of money that a seller requests as payment for the sale of a property.
- HOA Dues/Fees – Homeowner's association (HOA) dues are commonplace in housing developments, condos, and townhouse complexes. These fees go toward maintenance for common areas and building structures.
- Home Value – The value of a home based on an appraisal. This is considered to be the actual value of a home.
- Homeowner's Insurance – A type of insurance policy that covers homes for a variety of things like loss of use, damage to personal property within the home, structural damage, and liability. Specific subsections exist for natural disasters, like wind damage insurance, flood insurance, earthquake insurance, etc. These are typically based on the location of the property.
- Interest – The cost of borrowing a sum of money, calculated as a percentage of the principal amount.
- Loan Amount – The amount of funds being borrowed, usually tied to the home value.
- Loan Program – A blanket term used to cover the various loan structures and the organizations that secure them. (I.e., FHA 30-year fixed-rate mortgage, VA 15-year fixed-rate mortgage, 7/1 adjustable-rate mortgage, etc.).
- Loan Term – The time period (in years) in which a loan is expected to be repaid.
- Loan to Value (LTV) Ratio – The ratio of a loan amount to the value of an asset bought with that loan. LTV is expressed as a percentage.
- Mortgage Insurance Premium (MIP) – Insurance on FHA loans that require payments made from borrowers to protect the lender if the loan can't be repaid in full.
- Principal – The borrowed amount that must be repaid.
- Private Mortgage Insurance (PMI) – A type of insurance usually paid by the borrower (typically for conventional loans when the LTV is above 80%) that protects the lender in case the borrower defaults on the loan.