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Figuring out how much you’ll pay for your mortgage is a key step in the home-buying process — and will help you determine how much debt you’ll be able to take on responsibly.
To get your monthly payment estimate, enter the home price, length of the loan, interest rate, and your down payment. You can also account for other costs, like homeowners association fees, homeowners insurance, and property taxes.
By adjusting the various inputs, you can also see how a change in one factor — such as the term of your loan or a lower interest rate — will affect your monthly payments. And if you’ve already got a mortgage, this tool can also help you decide if it’s a good idea to refinance.
How Do I Calculate My Mortgage Payment?
If you prefer to do a little math yourself, you can use a paper and pencil to calculate your mortgage payment with this equation:
M = P[r(1+r)^n/((1+r)^n)-1)]
Here’s what that all means:
M = Mortgage payment
P = Principal amount or dollar value of your loan
r = Monthly interest rate (to get the right number, take your annual interest rate and divide it by 12)
n = Number of payments over the life of your loan (multiply the years on your mortgage by 12 to get the number of monthly payments you’ll make)
How Can a Mortgage Calculator Help Me?
A mortgage loan calculator is a great place to start your home-buying process because it can help you determine your budget. But it’s a useful tool for more than just that. It can also help you determine what type of loan is a good fit for you.
Some conventional loans have smaller down payment requirements — as little as 3% down. But there are ongoing costs associated with paying less up front. If you put down less than 20%, meaning your loan-to-value ratio (LTV) is over 80%, you will be required to pay for private mortgage insurance. And with less skin in the game, you may pay a higher interest rate, too. Our mortgage payment calculator can help you weigh the benefit of putting down a higher down payment.
Deciding How Much House You Can Afford
There’s an important distinction between how much you’re eligible to borrow for a house purchase and how much you can afford. One of the factors lenders consider in order to determine how much they’re willing to let you borrow is your debt-to-income ratio (DTI). Your DTI shows how much of your monthly income is needed to pay your debts. Most mortgages require a DTI of 43% or less, although depending on the type of loan and your credit score, you may qualify for a mortgage with a DTI of over 50%.
If your monthly income is $4,000, then you may be able to qualify for a mortgage with a $2,000 monthly payment if you have no other debt. But whether that’s affordable depends on your financial situation. Buying a home comes with the risk of other expenses popping up beyond your monthly payment. Having to replace a furnace or hot water heater can cost thousands of dollars, and property taxes or insurance costs can increase.
So it’s prudent to not borrow the maximum amount, especially if you don’t have a fully stocked emergency fund beforehand. Even if you’re eligible for a mortgage with a monthly payment that’s 43% or 50% of your income, many experts recommend a DTI ratio of 36% or less. Not only that, but lenders like to see borrowers have a lower DTI as well because it is less risky for them. Having a lower DTI will also help you qualify for a lower mortgage rate.
Understanding Your Mortgage Payment
Your mortgage payment isn’t just what you pay toward your principal loan balance each month. It also includes interest, taxes, and homeowners insurance. There are also other costs that could get tacked on, depending on what type of loan you have or how much you put toward a down payment. Mortgage insurance is an extra expense you’ll pay on some government-backed loans and on most conventional loans when your LTV is less than 80%. This insurance typically costs 0.5 and 1% of the loan amount every year, so it can add a lot to your monthly payments.
Outside of your mortgage payment, homeowners also have other expenses to account for, like homeowners association dues. You’ll also want to set aside funds for regular maintenance and unexpected home repairs. You may even be on the hook for higher utilities, compared to renting, if your rent included water, sewer, and trash.
Next Steps to Getting a Mortgage
The NextAdvisor mortgage calculator is a useful tool for estimating your monthly mortgage payments. But to get the complete picture, you’ll need to talk to a mortgage lender. Before you put in an offer on a house, you’ll want to get preapproved for a mortgage, which will give you a good estimate of how much you can borrow. But you won’t know exactly how much your monthly payment will be until after you submit an application for a specific property. That’s because costs like property taxes and homeowners insurance depend on the home and its location.
- 30-year mortgage rates
- 20-year mortgage rates
- 15-year mortgage rates
- 10-year mortgage rates
- VA loan rates
- FHA loan rates
- Jumbo loan rates
Mortgage Calculator Alternative Uses
A mortgage calculator is a useful tool for seeing how much you’ll pay each month. But it can also help you find the right type of mortgage, or decide if you want to pay extra toward your existing mortgage.
Paying off your mortgage early: You can enter extra monthly payments, annual payments, or one-time payments under the “amortization schedule” tab of our mortgage calculator. This makes it easy to see how much more quickly you can pay off your mortgage, and how much interest you’ll save.
When you’ll get rid of private mortgage insurance (PMI): For the typical conventional mortgage, you’ll need 20% equity in the home to be able to drop PMI. Looking at our mortgage calculator’s amortization schedule allows you to see exactly when you’ll hit 20% equity, not factoring changes in housing prices.
Choosing the right mortgage term for you: Once you’ve entered your down payment and home price, it’s easy to see how changing your loan’s repayment term will impact your monthly payment. Shorter-term loans will have higher monthly payments, but typically come with lower interest rates.
Compare how much interest you’ll pay: To see the total amount of interest you’ll pay, enter your mortgage’s details and click on the “amortization schedule” tab. The table below shows how much interest you’ll pay each month and, at the bottom, shows the total amount of interest. As you change your loan term or factor in extra payments the interest is automatically recalculated.