This free mortgage calculator will help you estimate your monthly mortgage payments. The components of a mortgage include your principal, interest, property taxes, property insurance, and PMI. Change the inputs to the calculator to estimate how it impacts the different components of your mortgage.
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Mortgage Calculator Results
First Month Payment Breakdown
Monthly Payment Breakdown over time
Total Breakdown Over The Lifetime of Your Mortgage
Can I afford that house?
Are you thinking about buying your first home? Here are a few things to consider. First important factor is the down payment and the next important factor is the ongoing expenditure.
Down payment and PMI
First and foremost – do you have enough saved up for a down payment toward the house? If you put less than 20% down, you have to spend on property mortgage insurance or PMI. Typically, it costs about 0.5% to 1% per year until your loan balance reaches 78% of the original purchase price. You can be proactive and ask your lender to get rid of the PMI as soon as your loan balance goes down to 80% of the original purchase price.
The PMI protects the lender from risk of default and not you, the homebuyer. This money is not applied toward the loan. So definitely think about waiting to accumulate at least 20% of the home price before taking the plunge into homeownership. If you are hell bent on buying, look for a smaller home in a low cost of living area. You can run the mortgage calculator to see how much this PMI will cost over the lifetime of the mortgage. For example, on a $200,000 home with only 5% down and an interest rate of 3% for 30 years, PMI alone would cost you upwards of $6,000 at a rate of 0.5%. For the first few months, until your loan balance reached 80% of the purchase price, PMI will be about 9% of your total monthly payment to the lender.
Term and Interest Rate
Monthly expenditure is the second factor to consider. A major chunk of your monthly expense is going to be principal and interest payments. The longer the term of your loan, the higher is the interest that you will pay. So do consider getting a mortgage term of 15 years with fixed rate instead of the conventional 30-year term. Also, shop around for the best interest rate to lower your payments.
Third thing to consider are property taxes. Taxes are high in high cost of living areas and will continue to go up every year. You will continue paying them long after your mortgage is paid off. So, do consider them in your calculations.
Fourth is insurance. Don’t skimp on insurance even if it is expensive. Home repairs can drain your finances. It is important to have good coverage so shop around but go for a reputable insurer.
Check if the home you are buying is part of an HOA or a homeowners’ association. Preferably avoid that property if you have another option. HOAs tend to be very restrictive and can be an unnecessary drag on your finances. For example, one friend whose home is part of an HOA had to get HOA permission on building a small vegetable garden in her yard. It is an unnecessary burden that can be avoided.
Other costs of homeownership
Some factors that are often ignored while computing monthly expenses are utilities, and maintenance. The bigger the home, the higher your heating and cooling costs. If you have a big yard, you may or may not need to hire a landscaper.
Do some research on homes and various costs, interest rates, taxes, etc and enter them in the calculator to see whether you can afford that home :).
Good luck! Again, a disclaimer – this calculator is for educational purposes only.
After you are done calculating your payments, also do a high-level budget of how much house you can afford. Here’s a link to our budgeti