5 mortgage calculator features you don’t use, but should use

Finding the best price for your home with an online calculator

A mortgage calculator is the first resource many home buyers use before they even start looking for a home.

It is a wise decision. A good calculator can estimate the price of the house you can afford.

You don’t want to look at homes that are overpriced. Equally important, you shouldn’t assume that you can only afford a small house. It is expensive to under-buy; you will have to sell and buy again in a few years.

A good mortgage calculator can help you determine your optimal price.

But there’s more to a mortgage calculator than just seeing your best monthly payment. Not many people consider these five features of mortgage calculators that can give you a better idea of ​​a home’s affordability and even help you pay more.

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Mortgage Calculator Feature 1: Account for “Forgotten” Property Costs

Mortgage calculators should be able to handle more than the obvious real estate price, interest rate, loan term, and down payment. Make sure you can include your home insurance payment, the property tax rate and, if applicable, homeowners association contributions.

The numbers may seem small compared to the total price of a house. But they can be important in determining which home you can afford.

A home buyer with an income of $ 60,000 a year and ten percent less could afford a home of around $ 270,000. (You can open a mortgage calculator here and see how much you can afford with your income.)

But that price assumes fairly affordable homeowners’ insurance and taxes, and no homeowners association (HOA) dues.

If these “extra” costs of homeownership increase, affordability decreases.

Lenders consider your full payment when they qualify you for a home. They look at the principal and interest on the loan, as well as homeowner’s insurance, property taxes, and HOA dues.

Let’s go back to the above example of a buyer earning $ 60,000 per year. This time we will increase the additional costs as follows.

  • Home insurance: + $ 300 per year
  • Property tax: + 0.2% per year
  • HOA membership: + $ 100 per month

Affordability drops by about $ 30,000 in home prices.

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As a home buyer, don’t assume that all properties have the same costs. Look at the real estate ad. It will detail annual taxes and HOA dues, if applicable.

Your insurance agent may be able to give you a rough estimate of the cost of homeowner’s insurance, based on the desired price of the home.

An overview of the often overlooked costs of homeownership will help you better determine what you can afford.

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Mortgage Calculator Feature 2: Spread Your Monthly Payment

You want to know where your money is going each month.

As the owner, you will repay part of the principal with each payment. Eventually, you’ll pay it off at zero if you keep the house long enough. The rest of your payment is mortgage interest, as well as items like home insurance that are usually collected with the payment.

The mortgage calculator breaks down the cost of each item.

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You include the correct information – house price, interest rate, loan term, and down payment – and see the monthly payment breakdown. You can also add property taxes, insurance, and HOA dues to see the impact they have on the monthly payment.

In this example, the insurance is $ 900, the property tax rate is 1.2%, and the HOA contributions are $ 100 per month.

These additions increase the monthly payment by $ 425. You need all the details to find out what you will owe and if a given combination of housing rate and loan is affordable.

Mortgage Calculator Feature 3: See the Effect of Lower Debt Payments

Many people only use a mortgage calculator in one way: determining the monthly payment.

But an advanced mortgage calculator will let you figure out how much home you can afford based on your annual income.

Rather than juggling house prices, down payments, and interest rates, you provide your annual income, your regular monthly debt, then the interest rate, loan term, and down payment. The calculator tells you the price of a house you can afford and the monthly payment.

The DTI figure is the debt to income ratio, which is the percentage of your income that goes to monthly debt. Lenders often look for a cap on the DTI, like 43%, to know that the borrower will not be in trouble. Many consumers aim for a 36% DTI to be conservative.

Note the dramatic effect on home affordability when monthly debt payments go down.

A home buyer who owes $ 500 a month in student loans, car loans, and other debt could afford a home of around $ 215,000. This assumes an income of sixty thousand dollars a year and ten percent less.

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The same borrower could afford a home over $ 285,000 if he only had $ 100 in monthly debt payments.

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This is an increase in purchasing power of seventy thousand dollars with only a reduction of 400 dollars per month in other payments. It might be a good idea to develop a plan to eliminate or reduce high monthly payments before you apply for housing.

Check your new rate (November 16, 2021)

Mortgage Calculator Feature 4: Work Back From Your Comfortable Payment

Instead of starting with the price or income of the house, a mortgage calculator should let you specify a monthly payment that fits your budget. Then the calculator works backwards to find the price of the house and the down payment you will need.

For example, if you wanted to pay $ 1,500 per month and had 20% down payment, you could afford a house price close to $ 290,000.

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You can always change the interest rate, loan term, and down payment (plus, under advanced factors, home insurance, tax rate, or HOA contributions). As you do this, the price of the house will change to reflect the new conditions.

Notice how different your mortgage interest rate is.

In this case, lower the rate by 50 basis points (0.50%) to 3.75%. According to government estimates, this is how much homebuyers often save by shopping from at least three lenders.

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Shopping around can increase purchasing power by about $ 14,000.

Check your new rate (November 16, 2021)

Mortgage Calculator Feature 5: Check Your Loan Repayment Progress

The fifth feature is the ability to see the progression over time of mortgage interest and principal payments.

Seeing the initial breakdown of monthly payments doesn’t let you see how you’re building equity, which can be important in making decisions about selling, refinancing, or establishing an equity line of credit.

In addition to the breakdown of monthly payments, you should also be able to see how the payments evolve to include larger amounts of principal over time.

Mortgage Calculator Amortization

You should be able to see the principal and interest of a monthly payment at any point during the term of the loan.

The following is a comprehensive report that shows basic loan information, the total principal and interest you will pay over the lifetime, and a month-to-month breakdown of each payment (with only the first year shown. for brevity).

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These advanced mortgage calculator features help you better plan your home purchase and mortgage applications so you know how many payments will be made and how much home you can afford.

What are the mortgage rates today?

Mortgage rates are low, increasing affordability for the average home buyer. As the mortgage calculator shows, home payments change dramatically when rates rise.

Get a quote on your mortgage and lock in low payments before rates go up. No Social Security number is required to get started, and all quotes come with live access to your mortgage credit scores.

Check your new rate (November 16, 2021)

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