How to Use a Mortgage Calculator – A Step-By-Step Guide


Using a mortgage calculator will help you understand how much it costs to buy a home. Mortgage calculations combine several factors to total your personalized monthly principal and interest payments.

Input your desired purchase price and the down payment you expect to make. Next, set your loan term and interest rate.

Calculate Your Monthly Payment

There are many mortgage calculators available online. Most ask you for a few pieces of information and then provide you with an estimate of your monthly payment. These tools are great for determining how much house you can afford, but be sure to use them with other resources.

A home loan’s monthly payments consist of principal and interest. Most of your monthly payments will go towards interest in the early years of your loan. A good rule of thumb is to spend at most 30% of your monthly income on a mortgage payment.

The mortgage calculator Dothan, AL will require you to input a loan interest rate. While this is less important than a down payment, knowing the interest rate you will pay for your home purchase is essential. A mortgage calculator will help you estimate this rate based on your home price, down payment, and loan term.

Determine Your Down Payment Amount

The bigger your down payment, the less you’ll have to pay interest. Mortgage calculators can help you determine how much to save to reach your desired down-payment amount.

Most calculators let you enter a home price or loan amount and an interest rate to see how much your monthly principal and interest payment will be. Some calculators will also estimate property taxes, homeowners insurance, and, if applicable, homeowner’s association fees.

lender’s interest rate varies by location and credit profile. To get a realistic idea of what you can afford:

  1. Check out Bankrate’s mortgage rates for your area.
  2. Use the mortgage calculator to adjust the rate, loan term, and other factors to experiment with different scenarios. You may be surprised to find that the house of your dreams is more within reach than you thought.
  3. However, housing expenses should be at most 28% of your income or 36% of your total debts.

Set Your Mortgage Term

A mortgage calculator can help you estimate what you can afford based on the loan amount, home price and down payment, and associated costs. These include property taxes, homeowner’s insurance, and condo/HOA dues (where applicable). You can also make extra payments to repay your mortgage loan earlier than planned.

Next, select a mortgage term. The longer the term, the lower your monthly payment will be. However, you’ll pay more in interest over the life of the loan.

Mortgage borrowers can opt for FRMs with fixed rates or ARMs that offer a fixed rate for an initial period, then move to an indexed rate. If you choose an ARM, factor in the initial rate (typically lower than for FRMs) and any potential increases. These will be reflected in your monthly principal and interest payments. A mortgage calculator can help you decide whether an ARM is right.

Add Recurring Costs

Many mortgage calculators have optional inputs that allow you to supplement your monthly principal and interest payments with extra payments. Extra payments decrease your loan balance, reducing the interest you pay and allowing you to reach your payoff date sooner.

A mortgage calculator is a key tool for prospective homebuyers to determine whether homeownership could be within their financial reach. However, it is just one of several tools that should be used to make an informed decision about buying a house.

Other important components to consider include your home price, down payment, and mortgage rate. The most important factor, however, is your household budget. Consider the 28/36 rule, which suggests that homebuyers should spend no more than 28% to 36% of their income on housing expenses and debts. This includes the mortgage payment, property taxes, homeowners insurance, and, if applicable, homeowners association fees. The mortgage calculator can help you estimate these recurring costs as well.