Home Q&A Definitions How to use this mortgage calculator

How to use this mortgage calculator

How to use this mortgage calculator

This mortgage payment calculator can figure out for you how much it will cost you to own a residence at today’s mortgage rates, taking into account principal, interest, taxes, homeowners insurance, and, if applicable, homeowners association fees.

Change the default values in the mortgage calculator to reflect your current situation, such as the mortgage rate and loan length.

There are three ways to use the mortgage payment calculator:

  1. Given current mortgage rates and a specified home purchase price, calculate the monthly mortgage payment for a home.
  2. To see how much house you can afford depending on your annual household income, use the calculator below.
  3. To determine the size of house you can afford depending on your monthly budget

Is it possible for me to get a mortgage?

When assessing your home-buying budget, a mortgage calculator can be useful. But keep in mind that you must qualify for a house loan even if you can afford the monthly payments.

Here are some mortgage qualifications:

Credit Score

Getting an above rating of credit score can increase the possibility to be eligible for getting a loan. You don’t always need to have a perfect CC to qualify in mortgages or known as securing a loan. You may be eligible of FHA loan even if your CC is 580.

Loan-to-Value Ratio

LTV compares the amount of your loan to the worth of your new home. Borrowing $300,000 to buy a $300,000 home, for example, equals a 100% LTV. Lenders can offer VA or USDA loans with a 100 percent LTV, but these programs are not available to everyone.

House/Home Value through Appraisal

Regardless of the home’s listing price or agreed-upon purchase price, lenders will not authorize loan amounts that exceed the home’s value.

Personal Finances

Lenders must verify your income to ensure that you can pay back the loan. W-2s, bank statements, and employment records will all be scrutinized. A lender will almost certainly ask to view your tax documents if you’re self-employed.

To examine your loan alternatives and a ‘real’ budget based on your actual finances, you can request a mortgage pre-approval or prequalification.

You might also use free apps to track your credit score, but keep in mind that the numbers in free apps are usually estimations. They are frequently greater than your actual FICO score. A lender is the one and only person who knows if you qualify for a mortgage or not.

Definitions for mortgage calculators

A down payment isn’t the only thing that goes into purchasing a property. The overall cost of your mortgage includes principal and interest payments, as well as monthly obligations such as property taxes and insurance.

Make sure you understand each phrase as you play about with the mortgage calculator so you can enter accurate data and get precise results.

Price of a house

The cost of a home is the amount of money required to purchase it. Once you and the seller have completed negotiations and placed the final amount down in a purchase contract, your home price may differ from the listing price.

The rate of interest

The amount of money you will return to the bank for your mortgage is determined by your interest rate. Interest rates are expressed in annual terms, even if they are paid monthly.

  • Your mortgage interest rate will not vary during the life of the loan if you get a fixed-rate mortgage. This also implies that your monthly payments will remain the same.
  • Your interest rate on an adjustable-rate mortgage may fluctuate after a set number of years. Your mortgage payments will adjust if your interest rate changes.

You can use today’s average mortgage rate for “interest rate” in this house mortgage calculator; lower interest rates mean you’ll pay less each month and throughout the term of the loan.

The loan’s duration

The length of the loan, sometimes known as the “loan term,” is the number of years until your house loan is fully paid off. The majority of mortgages have a 30-year term. Fixed-rate mortgages of 20 and 15 years have become more popular since 2010.

With a shorter-term loan, the monthly cost of a mortgage is higher, but the total cost of a mortgage is lower over time. When compared to a 30-year loan, homeowners with a 15-year mortgage will pay around 65 percent less in mortgage interest.

A shortened personal loan term, on the other hand, requires higher spending because the total amount unpaid is spread out over a shorter time frame.

A deposit is required

A down payment is the amount of cash you put down ahead to purchase a new property. The total purchase price will be covered by your down payment and the loan amount.

A down payment can be turned into equity right away. If you put $5,000 down on a $100,000 home and make a $5,000 down payment, you will have $5,000 equity (5%) in your new home even before you make the first monthly payment.

Low down payments of 3-3.5 percent are allowed on several mortgage programs, such as the standard 97 and FHA loans. Others, such as the VA and USDA loans, do not require any type of down payment.

Keep in mind that the money you put down on the house isn’t the only thing you’ll need at closing. You should also account for closing charges and other up-front expenses.

Down payment assistance programs are available in most places to assist borrowers in obtaining the funds necessary to purchase their own homes. Borrowers on conventional and FHA loans can use money donated to them by a close friend or relative as a down payment.

Insurance for homeowners

Your home is protected by homeowners insurance against minor, major, and catastrophic losses. This protection, which is also known as “hazard insurance,” is needed for all homes.

State laws vary, but in general, your homeowners insurance coverage must be large enough to cover the cost of reconstructing your home in its current condition. The cost of homeowners insurance varies by ZIP code and carrier.

Homeowners insurance is not to be confused with private mortgage insurance, which is a different type of insurance.

Homeowners insurance, like property taxes, can be paid in equal monthly installments with your mortgage payment. Escrowing your taxes and insurance is the term for this arrangement.

Taxes on real estate

Property taxes rates are levied against a property and paid to the state, city, and/or municipal governments. Property taxes can range from 0.5% percent to 2% percent or more of the value of your home/property on a yearly or annually.

Property taxes, sometimes known as “real estate taxes,” are usually billed twice a year. Property taxes, like homeowners insurance, can be paid in equal monthly installments with your mortgage payment. Escrowing your taxes and insurance is the term for this arrangement.

Escrow Account

‘Escrow’ isn’t a term on the calculator, but it will come up at several stages of the home-buying process.

An escrow business will transfer funds between parties before you close.

Your earnest money, for example, will almost certainly be placed in escrow to show the buyer that you’re serious about making an offer. It will be retained there until the end of the transaction, when it will be added to your down payment.

Your mortgage loan servicer will deposit a portion of your total monthly payment into another escrow account after you close.

This account’s balance will increase with each payment. The lender will pay your property taxes and home insurance bills out of escrow when they are due.

Dues to the Homeowners Association (HOA)

Condo owners and homeowners in a  (PUD) or townhome generally pay Homeowners Association dues (also known as HOA fees).

Monthly, Quarterly, Half a year, or Yearly, HOA dues need to be paid. They are paid separately to the association’s management business or governing body.

HOA dues are being paid by residential or homeowners to cover every service that can be shared. Services, on the other hand, include landscaping, elevator maintenance, maintenance and upkeep of common facilities that can be seen such as pools and recreation areas, and legal expenses to be shouldered by the community.

The cost of homeowner’s association dues varies depending on the building and community.

Mortgage insurance (PMI)

Mortgage insurance is a recurring monthly payment made by the homeowner to the lender.

Mortgage insurance is designed to safeguard mortgage lenders from losses on defaulted loans by “paying out” when a loan falls into default.

When the down payment on a conventional loan is less than 20%, mortgage insurance is required by Fannie Mae and Freddie Mac. Private mortgage insurance is the name for this sort of mortgage insurance (PMI).

Other loan types, such as USDA and FHA loans, require mortgage insurance as well. Mortgage insurance is referred to as mortgage insurance premium with FHA loans (MIP).

Once the homeowner has at least 20% equity, traditional PMI will be canceled. Unless the buyer makes a down payment of 10% or more, FHA mortgage insurance normally lasts the life of the loan.

Annual earnings

The amount of documented money you generate each year is referred to as annual income. W-2 income, 1099 income, K-1 payouts, Social Security income, pension income, and child support and alimony are all examples of income.

Non-reported earnings cannot be utilized to qualify for a mortgage. Enter your pre-tax income into the home loan calculator.

Monthly Dues

Monthly debts are regular payments that are due on a monthly basis. Auto leases, auto loans, school loans, child support and alimony payments, installment loans, and credit card payments are all examples of monthly obligations.

However, keep in mind that your monthly credit card obligation is the minimum payment due, not the whole balance owed. Use 5% of your debt outstanding as your minimum payment due on credit cards with no minimum payment due.

The Debt-to-Income Ratio (DTI)

Borrowers use the debt-to-income ratio (DTI) to estimate the affordability of a home. The DTI is calculated by dividing your monthly debt by your monthly verifiable income.

In general, a debt-to-income ratio of 45 percent or less is required for mortgage approval, though lenders will occasionally make an exception.

It’s worth noting that having a DTI of 45 percent may not be a good idea. A high DTI means that home costs take up a large portion of your household income.

Monthly Payments

Your monthly responsibility on your house is your entire monthly payment. This comprises your mortgage payment, property taxes, and house insurance, as well as, if necessary, homeowners association dues (HOA).

As the components of your monthly payment change, so will your monthly payment. Your real estate tax bill, as well as the price on your homeowners insurance policy, will fluctuate year to year.

After the first fixed period of an adjustable-rate mortgage expires, homeowners should expect their mortgage payment to fluctuate as well.


The process of repaying a mortgage loan to a bank is referred to as interest expense. The adjustable rate mortgage varies depending on the length of the loan. A 30-year loan will have a different repayment schedule than a 15-year or 20-year loan.

Your monthly loan payments will include greater interest early in the repayment period. Each month’s payment will include a little more principal and a little less interest as time goes on.

You’ll be paying largely loan principal and very little interest by the conclusion of the payback period.


Your loan’s principal is the amount borrowed from the bank. A portion of the principal is repaid to the bank as part of the monthly mortgage payment.

Until the debt is completely paid off, which could take 15 years, 20 years, or 30 years, the percentage of principal in each payment increases on a regular basis.

If your home’s value stays the same, paying principal each month improves your equity. Even if your loan balance is reduced, your equity proportion will decrease if the value of your home decreases.

Similarly, if the value of your property grows, your equity percentage will rise by more than the amount you’ve paid in principal.


You pay the bank rate interest in exchange for the ability to use the lender’s funds to purchase your own property. Interest is paid and have a due on a monthly basis until the debt is completely paid off or none

According to the amortization schedule for your loan, the amount of interest you pay to the bank each month lowers. The amount of mortgage interest you pay throughout the life of your loan is determined by your loan term and interest rate.

Estimated loan amount

After you apply for a home loan, federal law compels mortgage lenders to offer you a three-page ‘Loan Estimate.’

The Loan Estimate (LE) illustrates your entire mortgage costs throughout the term of the loan, including the down payment, closing charges, monthly payments, and interest paid.

Because all LEs follow the same pattern, it’s simple to compare loan offers side by side and discover the best bargain.

Make sure you qualify for a mortgage

Mortgage calculator represents an excellent choice of property which you can avail over the span of time. Only a lender and nothing but a lender, however, can confirm your mortgage eligibility and home-buying budget or budget friendly home and the mortgage eligibility