Mortgage Calculator
The Mortgage Calculator is designed to know the monthly installment amount due with a detailed amortization schedule with the other related cost against a collateral mortgage.
This simple Mortgage Calculator calculates the monthly payment due, along with other financial costs related to the mortgage. A user is also able to add the property tax and different kinds of insurances involved in the common mortgage-related expenses.
Changing US Mortgage Pattern:
The mortgage before the 1930s would be nearly unrecognizable today in the USA. It involves the variable interest rates, high down payments and short maturities. Our online free home mortgage calculator makes it possible to learn about the various factors related to the mortgage. The USA mortgage services provide many more options to borrowers than are commonly provided elsewhere due to its flexible mortgage market. The US market allow the users to choose between the fixed or floating rate of interest; they can lock in their interest rate in between the time they apply for the mortgage.
Factors Affects Mortgages
The mortgages are long-term loans given to the people with nominal payments. It is affected by the asset markets, monetary policy and general economic conditions. The equilibrium model of the most ages necessary to understand before attempting to avail any kind of facility. It is recommended to use the free online mortgage calculator for forecasting the future payments. Different factors can affect the level of the nominal yield curve and the transitory shocks on the interest rate.
What is a Mortgage?
“A mortgage is a secured loan and a property is pledged against a mortgage. The financing amount is the percentage value of the property or asset. In terms of home loan it is an amount of money borrowed to pay for real estate. The mortgage amount helps the buyer pay the seller of a house, and the buyer agrees to repay the money borrowed over a period of time. The repayment amount is 15 or 30 years or less. A user needs to calculate the payment by the monthly mortgage calculator before applying for a mortgage. It allows what is a feasible amount for a user according to their running expense per month or annual.
Why Need the Mortgage Calculator?
There are multiple reason to use bankrate mortgage calculator:
- To learn about the choice of a loan-to-value ratio.
- To take rational refinancing and default decisions.
- To educate ourselves about the mortgage instrument.
This topic is written after a complete literature about the latest research paper written about the mortgage. It explains mortgage choices are categorized and allow masses to learn about various mortgage related issues.
What Mortgage Calculator Calculates?
The free calculator for mortgages helps to calculate the following loan related information:
- Loan amount: Reasonably able to know the borrowed amount from a lender or bank. A user can calculate the amounts to the purchase price minus any down payment for their mortgage.
- Down payment: A user can forecast the upfront payment or the down payment for their home purchase. Normally required to pay 20% or more as a down payment for purchasing a property.
- Loan term: Determine the time period for loan or mortgage as users need to repay the amount in a certain time. The time period may depend upon a user's repayment capacity. Common mortgages are for 15, 20, or 30-year terms but different interest rates are applied. Lower interest rate applied on a shorter period due to less recovery time.
- interest rate: Learn about the percentage of the loan charged as a cost of borrowing. In different cases the fixed-rate mortgages (FRM) or adjustable-rate mortgages (ARM) are applied.
Costs Associated With Mortgage
There are multiple costs associated with the mortgage but basically these are two type of cost:
- Recurring Cost
- Non-Recurring Cost
Recurring Costs
Recurring costs are usually paid throughout the life cycle of a mortgage. These costs increase with time as a byproduct of inflation in an economy. Our online mortgage "Include Options Below" checkbox for the recurring cost. So a user is able to find the accurate financial burden. The recurring costs are:
- Property taxes: It is a tax that property owners pay to governing authorities or a state. In the USA the annual real estate tax in the U.S. varies by location or state by state. Normally the Americans pay about 1.1% of their property's value to the state authorities.
- Home insurance: It is an insurance policy that protects the owner from accidents or mishapes in case of a sudden situation. It can also contain personal liability coverage of a person in case of lawsuits involving injuries that occur on and off the property.
- Private mortgage insurance (PMI): The PMI protects the lender if the borrower is unable to repay the loan or file a case against the lender. In the U.S. specifically, if the down payment is less than 20% of the property's value, then the PMI is used as an instrument to protect the lender's rights.
- HOA fee: It is a fee paid by the property owner to the homeowner's association (HOA). It is used to protect the environment or other related activities. It usually amounts to less than one percent of the property value.
- Other costs: Other costs may include the utilities, home maintenance costs, and anything maintenance to the general upkeep of the property. It is common to spend 1% or more of the property value on annual maintenance alone.
Non-Recurring Costs
The non recurring cost include:
- Closing costs
- Initial renovations
- Miscellaneous costs
Mortgage Calculator Formulas
The mortgage calculator uses the following standard financial formulas to compute all results accurately.
-
Monthly Principal & Interest (P&I) Payment:
The core formula for the fixed monthly mortgage payment is:
monthlyPI = L × [r(1+r)n] / [(1+r)n - 1]
Where:
- L = Loan Amount (homePrice − downPayment)
- r = annualRate / 12 / 100 (monthly interest rate)
- n = loanTerm × 12 (total months)
Special case: if r = 0, then
monthlyPI = L / n
-
Down Payment:
Can be a percentage or fixed amount.
Percentage mode: dp = (downPayment / 100) × homePrice
Dollar mode: dp = downPayment
loanAmount = homePrice − dp
-
Monthly Tax / Insurance / HOA / Other Costs:
Recurring costs converted to monthly values.
Percentage mode: monthly = (value / 100) × homePrice / 12
Dollar mode: monthly = value / 12
-
Annual Increase:
Costs grow annually due to inflation.
- monthlyTax = monthlyTax × (1 + propertyTaxIncrease / 100)
- monthlyInsurance = monthlyInsurance × (1 + homeInsuranceIncrease / 100)
- monthlyHOA = monthlyHOA × (1 + hoaFeeIncrease / 100)
- monthlyOther = monthlyOther × (1 + otherCostsIncrease / 100)
-
Amortization Schedule:
Each month the loan balance reduces:
- interestPayment = remainingBalance × monthlyRate
- regularPrincipal = monthlyPI − interestPayment
- remainingBalance = remainingBalance − (regularPrincipal + extraPayment)
-
Total Interest Without Extra Payments:
originalTotalInterest = monthlyPI × n − loanAmount
-
Interest Saved Due to Extra Payments:
interestSaved = originalTotalInterest − actualTotalInterestPaid
-
Total Out of Pocket:
Total paid over the life of the loan:
totalOutOfPocket = (loanAmount + totalInterestPaid) + totalTax + totalInsurance + totalPMI + totalHOA + totalOther
-
Biweekly Payment:
26 half-payments per year (accelerated payment).
- biweeklyPayment = monthlyPI / 2
- biweeklyRate = annualRate / 26 / 100
- bwInterest = balance × biweeklyRate
- bwPrincipal = biweeklyPayment − bwInterest
- balance = balance − bwPrincipal
-
Total Monthly Cost (Display):
Total estimated monthly housing cost shown:
totalMonthly = monthlyPI + monthlyTax + monthlyInsurance + monthlyHOA + monthlyOther + firstMonthExtraPayment
References
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