# Mortgage Calculator

One of the biggest investments you will make in your life is to purchase a home. For many people, this investment means borrowing money through a mortgage or other lending institution. Although it seems easy enough, most people are unsure about what they can afford for their monthly payment and the best way to go about finding out if they qualify for a certain amount.

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## How to calculate a mortgage payment

Calculating the monthly payment of a mortgage seems like it should be easy. Mortgage lenders can determine your monthly payment in an instant, but they are also taking into account factors that you may not even know about! One of the most important things that determines your monthly payment is your loan term.

The longer the loan term, the lower your monthly payment will be - however, you'll end up paying more for interest over time. For example, say you purchase a home for \$200,000 with a 20% down payment (\$40,000). Mortgage rates at the time are 6%, and you decide on a 30-year loan term. Here's what these numbers would mean to you:

If you chose a 15-year loan term instead, here's what the numbers would mean to you:

That's an increase of \$316 per month! However, over 30 years you may pay nearly \$100K of interest, compared to spending only \$50K of interest over the course of a 15-year fixed loan.

Mortgage calculators and lenders use your down payment amount, interest rate, length of loan term, and home price to determine the monthly payment that works best for you. Some mortgage rates are fixed over the life of your loan - so if your rate is 6% today at 20 years long, it will be 6% at 30 years too. There are also options such as adjustable-rate mortgages where the mortgage rate you lock in may change over the duration of the loan term.

## How a mortgage calculator helps you

### Loan Term Length

Loan term length is the biggest factor that's mortgage lenders can consider determining your monthly payment. Mortgage calculators are very helpful in determining how long you should make payments over - especially if you plan on moving in a few years or more! A shorter-term length means you will pay less in interest, but it also means higher monthly payments. Mortgage calculators help individuals enter their information and come up with an estimated number for what they could expect to pay, depending on the time frame of their home purchase.

### Too Much House

Getting too much of a home is a common problem among many Americans. Mortgage calculators help buyers figure out how much of a home they can afford by specifying the variables such as their down payment amount and mortgage rate. Mortgage rates play a big part in determining your monthly payment - so it's important to not underestimate what you should be spending on your new home.

### Down Payment

The money that you put down on a home purchase is your down payment amount. Mortgage calculators can help potential buyers figure out how much they should be putting aside before they even begin to look at homes with real estate agents.

## Typical costs included in a mortgage payment

### Principal

The principal amount is the money you are borrowing from a lender. This can be anywhere from 5% to 20% of your total home purchase. Mortgage calculators help buyers figure out how much they might need to borrow for their new home, based on what they have saved up already.

### Interest

Interest rates are important because it determines how much you'll be paying in interest over time. Mortgage calculators can help potential buyers determine if they should take more or less time with their mortgage term length - as well as, how high of an interest rate they can afford depending on their down payment amount and loan amount.

### Property Taxes

Property tax is a percentage that you will be required to pay for the land your home sits on - typically 1 to 3% percent of your entire home purchase. Mortgage calculators help buyers determine how much money they should be spending on their new house, as well as how to afford it given certain variables such as interest rates and property taxes.

### Homeowners Insurance

Homeowners Insurance is another percentage you'll be required to pay each month - typically 1-2% of your home's value.

### Mortgage Insurance

Mortgage insurance is an insurance policy that protects the lender if you happen to default on your loan - they can then take back your home and sell it.

## Monthly mortgage payments can go up

Monthly mortgage payments can go up or down depending on any adjustments to your interest rate in cases where you’ve elected for an adjustable-rate mortgage. Mortgage calculators help buyers determine what they need to put down as a down payment, how long of a term length they should choose for their new home, and the most ideal interest rate based on those variables. Mortgage rates are fixed over the life of your loan - so if your rate is 6% today at 20 yeas long, it will be 6% at 30 years too.

## Common mortgage questions

### What happens when you qualify for a loan with a low credit score?

When you qualify for a loan at a given interest rate, the lender will give you a certain amount based on your monthly budget and other variables such as your down payment and length of term. The other variables that help you qualify for a loan is that you will be required to pay an appraisal fee, origination fee and discount points.

### Can you get a home loan without a credit score?

Yes, but it depends on your credit score type. Mortgage calculators help buyers determine what kind of interest rate they qualify for - even if their credit is subpar. Mortgage rates can range anywhere from 3-16% percent - so the higher your credit score, the better rate you can expect to receive.

### What is the difference between being pre-qualified and pre-approved?

Being prequalified just means that you have submitted your documentation to a lender to tell you how much they would loan you based on your monthly budget.

Pre-approval simply means that the lender has looked over your documentation and has said that the amount you are seeking is what they are willing to give you.

### How much mortgage can I afford?

You can get an estimate of how much of a mortgage you can afford based on how much you can pay each month using Mortgage Calculators. Mortgage calculators help buyers determine the terms of their loan, down payment amount and interest rate that would work best for them - based on what they have saved up already. Mortgage rates are typically 1-16% percent, so depending on your credit score and other variables like income, it could make a difference in whether you get approved by a lender.

### What is a mortgage?

A mortgage is a loan that you can get to buy a house. The mortgage is determined by a lender who opens a line of credit with a set amount that you will be able to pay back over time. By using our mortgage calculator, it will help you estimate your monthly payment.

### What is mortgage insurance?

Mortgage insurance is an insurance policy that protects the lender if you happen to default on your loan - they can then take back your home and sell it.

### How much should I save for a down payment?

Depending on the type of loan you are trying to apply for, it is important to save a down payment of anywhere from 3-20% percent of the value of your home. The reason for the range of down payments is to make sure that you can afford your monthly payments.

### How will interest rates affect your home loan?

Interest rates can affect a home loan because homeowners may have a higher monthly payment if their interest rate changes. Interest rates change can change over time because of the inflationary index.

### What does your mortgage payment include?

A mortgage payment includes your Mortgage Principal, Mortgage Insurance, Mortgage Interest, and your Mortgage Taxes.

A mortgage principal is the amount of money that has been borrowed from a lender and is to be paid back.

Mortgage insurance is an insurance policy that protects the lenders interest in your loan if you default.

Mortgage Interest is the amount of interest you owe on your principal balance each month.

Mortgage Taxes are taxes that go toward paying for local, state, and national services.

## Mortgage calculator uses

A mortgage calculator can be used to estimate your monthly payment. The calculator can also help determine the type of loan you are able to apply for, how much of a down payment will be needed for the property that is desired, what the interest rate would be around based on different variables like income, credit score, length of the term of the loan, etc.