Are you about to purchase your dream home? Whether you’re a first-time homebuyer or you’re looking for another property, you have to make sure you’re making the right financial decisions. That includes getting an estimate of your monthly payments through a mortgage calculator. Keep reading to learn why this tool is crucial before buying a house and how you can use a mortgage calculator.
With a mortgage calculator, you will get an estimate of your monthly mortgage payment, including the total interest and principal. All you need to do is provide relevant information about the mortgage, such as the loan amount, down payment percentage, and so on.
When calculating mortgage payments, you can choose the traditional method and follow complicated formulas and equations. If you want a faster and easier process, take advantage of a mortgage calculator. Here are the variables that you need to collect and enter into it to get started:
Here, you simply have to provide the price of the home you’re planning to purchase. You can easily get the amount from the property listing.
Then, enter the down payment percentage. If the down payment is higher, the interest rate will likely be lower. This also means a relatively smaller loan payment per month.
Enter the price of the house you’re eyeing minus your down payment. You can also include other costs added to the balance. For refinancing, provide the expected balance after closing.
This includes how long you’ll be paying for the loan. A larger number of payments or a longer term means that your monthly payment is lower. However, you will have to pay more interest on it. Meanwhile, if the term is shorter, your monthly loan payment is higher. But that also means less interest to pay.
Provide the annual interest rate, so the mortgage calculator can provide you with an estimated total interest amount. You can get quotes from various mortgage lenders. In some cases, you would have to enter the range of your credit score, so that the mortgage calculator will give you an estimated interest rate.
Enter the annual property tax into the mortgage calculator. You can check the assessor’s website to get the local tax rate. Lenders would usually cover one-twelfth of the yearly property tax for each monthly loan payment and settle the tax for you.
When buying a home, you also have to consider the annual fee to insure your future property from natural disasters, theft, fire, and other kinds of damage included in the insurance. Flood and earthquake insurance may also be needed depending on the house’s location. While homeowners insurance does not influence your loan amount, lenders often add it to the mortgage payment. They will then settle the premium for you.
If your down payment is below 20%, you may have to get private mortgage insurance (PMI). PMI is usually 1% of the mortgage balance. You can put 0 for an unknown value, and the mortgage calculator will do the rest.
Lastly, a mortgage calculator will typically include the payment method. Simply choose whether it’s the end of the period or the start of the period.
Buying a home is both an investment and a commitment, so you’ll want to make sure you have the right amount of information beforehand. Start by using Wealtheo’s reliable mortgage calculator. Want to ensure you’re getting the right mortgage and buying the home perfect for your needs? Take advantage of our mortgage courses today.