Home Loan Affordability Calculator
Need help to calculate cost of owning a home? With variables such as mortgage interest rates, homeowners insurance, taxes and accounting for principal and condominium association fees, determining your monthly mortgage payment can be confusing. Well don’t fret…..we have this mortgage payment calculator for the task. Its default values including length of loan and mortgage rates are adjustable as per your situation.
The mortgage payment calculator can be used in three ways. Firstly, it can be used to calculate per month mortgage payment of a home using today’s mortgage rates and purchase price of a particular home. Secondly, it can be used to provide you with maximum price for purchasing home according to your annual household income. Thirdly, you may get to know the maximum home purchase price according to your monthly budget for housing.
Using a Mortgage Payment Calculator
This is the dollar amount against which you purchase your home. This is different from ‘listing price’ which can be defined as the price at which the home is listed for sale. Loan fees and closing costs are not included in home price. Usually home price is the contractually agreed upon price for a particular home.
This is the rate at which people repay the bank for the mortgage they got. These are expressed on per annum basis. There is no change in interest rate for fixed-rate mortgages. But there is for adjustable-rate mortgages. While using this mortgage payment calculator, please use today’s mortgage rates to calculate the interest rate.
It is also known as loan term. It can be explained as the number of years in which a borrower pays off the loan in full. Most mortgages have this period fixed at 30 years. Since 2010, 15 year fixed rate periods and 20 year fixed rate periods have been more common among buyers. The shorter the loan term is the higher the monthly mortgage will be. But you will have to pay low interest over time. Homeowners who have acquired a 15 year mortgage will have to pay around 65% less mortgage interest rate as compared to owners who have a 30 year loan plan.
It can be defined as the amount of equity that is deposited when you make a purchase. For example, if someone purchases a $100,000 house, he or she will have to pay $5,000 down payment. The $5,000 sum, that is 5% of the total amount, is the equity in your new house.
Mortgage programs such as FHA loan require just 3.5% down payment. Others such as VA loan and USDA loan require no down payment. One more thing to take into account is that down payment is not the only cash required. You should have budget to compensate for the closing costs and other items.
It is an insurance policy to protect your home against major, minor or catastrophic loss. It is also dubbed as ‘hazardous insurance’ by some. All homeowners have to carry this insurance. Generally, insurance policy should be in an amount that should cover rebuilding your home, but laws differ from state to state. This insurance varies by zip code as well as insurer. Homeowners insurance and private mortgage insurance are two different things. Homeowners insurance and property taxes can be divided in equal installments and paid along with monthly mortgage payment. The arrangement is dubbed as ‘escrowing’ your insurance and taxes.
These are the taxes that are assessed on a home then paid to your city, state and/or local government. In cost it can range from one-half percent of your home’s value to two percent or more on per annum basis. These are also called as ‘real estate taxes.’ They are billed per year. Property taxes and homeowners insurance can be divided in equal installments and paid along with monthly mortgage payment. The arrangement is dubbed as ‘escrowing’ your taxes and insurance.
Homeowners Association (HOA) Dues:
They are typically paid by condominium owners and other homeowners of a planned urban development (PUD) or town home. They are paid on monthly basis, semi-annually or annually. These are paid separately to management company or a governing body for the association. HOA dues cover up services such as elevator maintenance, upkeep, landscaping and legal costs for residents as well as tenants.
Mortgage insurance (PMI) and (MIP):
It is a monthly payment paid by homeowner for the benefit of the lender. It pays out in case of default. Lender receives payments. It is insured for conventional loans through Fannie Mae and Freddie Mac for which down payment of 20% or less is required. This mortgage insurance is dubbed as Private Mortgage Insurance (PMI). Other mortgages such as USDA loans and FHA loans also require mortgage insurance. With FHA and USDA loans, mortgage insurance is dubbed as Mortgage Insurance Premiums (MIP). Sometimes it is paid upfront (UFMIP) or as a single-premium. It is also sometimes lender-paid (LPMI).
It is the amount of documented income that you earn per year. Income can be earned in the forms of pension, child support, W-2 income, social security income, K-1 distributions and alimony. Non-reported income cannot be used for qualifying purposes on a mortgage. Always use pre-tax income when you are using a mortgage payment calculator.
These are recurring payments that are due to be paid monthly. These include student loans, auto leases, auto loans, alimony payments and child support, credit card payments and installment loans. One thing to be noted is that your monthly credit card payment is the minimum due payment and not your total balance owed. For credit cards that has no due payment please use 5% of your balance owed as your minimum due payment.
It is a lender term that is used to sort out a person’s home affordability. It is calculated by dividing the sum of your monthly debts into the verifiable monthly income. Generally, mortgage approvals demand a 45% debt-to-income ratio or less. There are exceptions too. A 45% DTI is not advisable. It will throw most of your income into housing payments.
It is the monthly obligation on your home. It includes your mortgage payment in addition to homeowner association dues (HOA) where they are applicable. Monthly payment will change over time because its components will change. Real estate tax bill also changes on annual basis so does the premium on your homeowner insurance. Homeowners who have acquired an adjustable rate mortgage should expect that their mortgage payment will change over time after the initial fixed period for the loan ends.
Amortization (pronounced as ah-more-tih-ZAY-shun):
It is the schedule according to which a mortgage loan is repaid to a bank. It varies as per loan term. A 30-year mortgage will have a different pace than a 15 or 30 year one has. In earlier years, traditional amortization schedules consist of high percentage of mortgage interest along with a low percentage of principal repayment. But in the later years, mortgage interest rate percentage plummets and principal repayment percentage rises. For example, at today’s mortgage rates, if we view the first year of a loan, a 15 year mortgage has 38% interest and 62% principal while a 30 year mortgage has 72% interest and 28% principal. The latter will meet 38/62 ratio not before than its 18th year.
It is the amount that is borrowed from a bank then it is repaid to the bank each month as part of mortgage payment. Principal repayment increases monthly until the loan is paid in full. The loan term may be 15, 20 or 30 years. Regular monthly payments increase your equity on the basis of assumption that your home’s value has not changed. In case value of your home drops, equity percentage decreases instead of reduction in your loan’s balance. Similarly if value of your home increases, your equity percentage will rise by an amount that is bigger than your payment on principal.
It is the amount you pay to a bank from which you borrow. They are paid monthly. A portion of monthly interest payment decreases as per your loan’s amortization schedule. Your entire mortgage interest payment depends on your loan term as well as the mortgage interest rate.