Your Ultimate Mortgage Calculator Guide
Whether you’re thinking about buying a home shortly, or ready to refinance your current house, a mortgage calculator can help you fully understand your monthly payments. With the help of a mortgage calculator, you can determine how much your monthly mortgage would cost based on metrics like home price, interest rate, loan amount, and loan term.
Using a mortgage calculator when in the process of buying a home can help you understand more about your finances, and help you set a realistic budget for your new home. Continue reading to learn all about mortgage calculators, how to use them, and how it’s beneficial to you as a buyer.
What Is a Mortgage?
A mortgage is an agreement between you and a lender that allows you to borrow money to purchase or refinance a property. The borrower (you) agrees to pay the lender over some time, usually in a series of monthly payments.
To acquire a mortgage, borrowers must meet several criteria including minimum credit scores and down payments. There are four main types of mortgage loans for home buyers to choose from:
- Conventional mortgages: Borrower needs a higher income and credit score to qualify, but the interest rates are typically lower.
- Government-backed mortgages: Ideal for first-time buyers and includes FHA, USDA Rural Development, and VA home loans.
- Fixed mortgages: The interest rate you agree to at the beginning is the same one you’ll have for the life of your loan.
- Interest-only mortgages: The borrower pays only the interest for some or all of the term, with the principal balance unchanged during the interest-only period.
Related: How to Apply For a Mortgage
What Is a Mortgage Calculator?
A mortgage calculator is a digital tool that estimates your monthly payment and the terms of your mortgage — and is great for determining what you can afford on a home. Mortgage calculators take the purchase price, down payment, interest rate, and other monthly homeowner expenses into consideration when estimating your monthly payments.
What Are The Benefits of Using a Mortgage Calculator?
Starting your home-buying journey without a ballpark idea of what you can afford is a recipe for disaster. While there are many benefits to using a mortgage calculator, one of the best features is it will break down your monthly payments and show you what you will be paying for. The calculator will give you an estimate of your principal, interest, property taxes, etc.
In addition to analyzing your payments, a mortgage calculator will help you determine a realistic budget for house hunting. Having an estimate of what you can afford when going through the home-buying process will ultimately help you find the home of your dreams faster, and mitigate the stress of wondering if a property is within your budget.
In addition to using this mortgage calculator guide, hiring a Redbud Group REALTORS® will expedite your home-buying process! Contact us to be connected with an expert agent!
How To Use a Mortgage Calculator in 5 Easy Steps
Online mortgage calculators are very user-friendly, so if you have all of the correct information, it should be rather easy to determine your monthly payments. To make it even easier, we have broken down the process into five easy steps:
1. List the Current Home Price
First, you will need to enter the price of the home you are interested in. This information can be found from the property listing, or most recent appraisal.
2. Enter Your Down Payment
Next, you will need to enter the down payment amount that you plan to pay. You will need to enter the dollar amount and the percentage of the home price. However, if you’re using The Redbud Group’s mortgage calculator, it will automatically calculate the percentage for you once you enter the down payment amount, and vice versa.
3. Input the Interest Rate
After you determine your down payment amount, it is time to input your interest rate — which is the percentage of the loan amount the lender charges for lending money.
4. Set Your Mortgage Term
You’re almost done! The next step in using a mortgage calculator is to set your mortgage term. To put it simply, a mortgage term is how long you have to repay the loan. For most types of homes, mortgage terms are typically 15, 20, or 30 years.
5. Determine Your Private Mortgage Insurance (PMI)
While this metric may be a rough estimate, PMI is important in estimating your monthly mortgage payments. If your down payment is less than 20% of the home’s purchase price, PMI can become a part of your mortgage payment.
Buying Your Next Home With The Redbud Group
Now that you have this mortgage calculator guide and know how to use it, it’s time to take the next step toward buying your new home. The world of real estate can be unpredictable and tricky — but the good news is, you don’t have to go through it alone!
When you choose to work with an expert Redbud Group REALTORS®, you can be confident that you are in the best hands. Our agents are equipped with the knowledge and expertise required to make your buying process as easy as possible. To learn more about how we can help you buy your next home, use the button below or visit our website! We would love to connect you with one of our experienced agents.
