Calculator Mortgage - Calculator Guru (2024)

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Monthly Payment Breakdown

How to calculate your mortgage payments

First, input the loan amount.

Next, you'll see “Length of loan.” Choose the term — usually 30 years, but maybe 20, 15 or 10 — and our calculator adjusts the repayment schedule.

Finally, in the "Interest rate" box, enter the rate you expect to pay. Our calculator defaults to the current average rate, but you can adjust the percentage. Your rate will vary depending on whether you’re buying or refinancing.

Typical costs included in a mortgage payment

Loan-related costs:

Principal: This is the amount of money you borrowed from the lender and are gradually paying back over the life of the loan. Each payment reduces the outstanding principal balance.

Interest: This is the fee you pay for borrowing the money. It's calculated as a percentage of the outstanding principal balance and is determined by your loan amount, interest rate, and loan term.

Mortgage insurance (optional): This is required if you put down less than 20% of the purchase price. It protects the lender if you default on the loan.

Housing-related costs (often collected and paid by the lender through an escrow account):

Property taxes: These are levied by local governments to fund public services like schools and roads. The amount you pay depends on the assessed value of your property and the local tax rate.

Homeowners insurance: This protects your property from damage due to fire, theft, weather events, and other perils. The cost depends on the type and value of your property, your location, and your claims history.

Homeowner's association (HOA) fees (optional): If you live in a community with an HOA, you'll likely pay monthly fees to cover the cost of common amenities and maintenance.

Deciding how much house you can afford

Buying a house is a big decision, and one of the most important factors to consider is how much you can afford. Here are some steps to help you decide:

1. Calculate your income. This includes your salary, bonus, and any other regular income you receive.

2. Factor in your debts. This includes your car loan, student loans, credit card debt, and any other ongoing payments you have.

3. Use the debt-to-income (DTI) ratio. This is a measure of how much of your monthly income goes towards debt payments. Lenders typically prefer a DTI of 36% or lower.

4. Consider your down payment. A larger down payment will mean a smaller loan and lower monthly payments. Aim for at least 20% down, but 10% or even 5% may be possible depending on your loan type and qualifications.

5. Think about your lifestyle. How much do you spend on groceries, utilities, transportation, and other expenses? Make sure you can comfortably afford your mortgage payment without sacrificing your quality of life.

6. Get pre-approved for a mortgage. This will give you a better idea of how much you can borrow and what your interest rate will be.

How to lower your monthly mortgage payment

Refinance to a lower interest rate: This is often the most effective way to reduce your payment significantly. If current rates are lower than what you have now, refinancing can shave hundreds off your monthly payment. However, there are closing costs involved, and you may not qualify if your credit score or property value has dipped.

Extend your loan term: Stretching your loan term over a longer period, say from 30 to 40 years, will lower your monthly payment. But remember, you'll end up paying more interest overall with this approach.

Recast your mortgage: This option changes your payment schedule without taking out a new loan. By recalculating the amortization schedule based on your remaining principal and current interest rate, you can lower your monthly payment. However, you'll pay off the loan slightly later than planned.

Reduce your homeowners insurance: Shop around for a different insurance provider or reconsider your coverage options to see if you can find a cheaper policy.

Appeal your property taxes: If you believe your property tax assessment is inaccurate, you can file an appeal to potentially lower your tax bill and, consequently, your monthly payment.

Make additional payments: While not directly lowering your monthly payment, increasing your payment frequency or making lump sum payments towards the principal can reduce the overall interest paid and shorten the loan term.

Consider a loan modification: If you're facing financial hardship, you may be eligible for a loan modification program offered by your lender. This could involve temporarily lowering your interest rate or extending your loan term.

Explore alternative income sources: Generating additional income through a side hustle or renting out a portion of your home can provide you with the extra cash to cover a higher mortgage payment.