# Mortgage Calculator | Money

Use Money’s mortgage calculator to estimate your monthly payments based on the price of the house, current mortgage rates, and the type of loan.

You can also use our calculator to estimate how much you’ll pay based on your credit score and how much you’ve saved for a down payment. Enter your information, see the results, and find out how many homes you can afford.

## Mortgage Calculator Guide

Our mortgage calculator allows homebuyers to see how different inputs – purchase price, credit score, interest rate, and down payment amount – affect their total payment to help determine how much real estate they have. can comfortably afford.

When looking for a new home, keep in mind that mortgage rates change daily and vary from lender to lender. So use this loan calculator to get a rough estimate and then make sure you get quotes from multiple lenders. (We recommend one of Money’s Best Mortgage Lenders of the Year.)

Once you start actively looking for a home, make sure you get pre-approved so you can act quickly once you’ve found a home you want to bid on. Your starting mortgage balance will be the price you pay for the house less your down payment.

### How to calculate your mortgage payment

Three main factors determine your monthly mortgage payment: the loan amount, the interest rate, and the length of the loan. Your credit score and the location of your home will also affect your interest rate and, in turn, the amount you pay.

Additional expenses such as Homeowners Association (HOA) fees, closing costs, property taxes, and homeowners insurance should be factored into your monthly housing expenses.

#### Formula to calculate your monthly mortgage payments

While our calculator relieves you of computing, the geniuses of mathematics can do it on their own with the following formula:

M = P *[(i/12*(1+i/12)n)]/[(1+i/12)n-1]

M – your monthly mortgage payment

P – the principal amount of the loan

I – the monthly interest rate, which must be divided by twelve (corresponding to the months of the year) since lenders give an annual rate

m – the number of payments over the term of the loan (number of years), or the amortization schedule. For example, for a 30-year mortgage, n would be 360 â€‹â€‹payments, (12 payments per year over 30 years, or 12 * 30).

### What factors affect your mortgage payments

#### Deposit

Putting 20% â€‹â€‹down payment allows you to avoid paying for private mortgage insurance (PMI). Greater equity also gives you more term finance options, but the average down payment is around 6%, and it is possible to get a home loan with as little as 3% down payment. .

With our calculator, you can enter the part of the cost of the house that you expect to pay upfront as a percentage or as a dollar value.

#### Interest rate

Interest on a mortgage is calculated monthly and is part of your annual percentage rate, or APR, which also includes the fees you have to pay the bank to borrow money. Interest rates have remained at historically low levels since 2020, when the state’s Federal Reserve decided to lower interest rates in response to the coronavirus pandemic.

Our calculator automatically fills in an average mortgage rate based on the information you enter, but you can override it to see how rate changes might impact your costs.

#### Type of loan

The most common mortgage loan is a conventional 30-year fixed-rate loan or a fixed-rate mortgage, but some people opt for 15-year loans to pay off debt faster or a variable rate mortgage to secure a mortgage. lower rate. In most countries, if your mortgage is over \$ 510,400, you will need to take out a jumbo loan.

#### Credit score

An estimate of the health of your credit. Credit scores range from Average (580-669) to Good (670-739), Very Good (740-799), and Excellent (800 and above). Anything below 580 is considered bad credit.

### How to reduce your monthly mortgage payments

Having trouble paying your mortgage? There are many reasons why you might need to lower your monthly mortgage payments. Perhaps you were too ambitious in purchasing your home, have other important financial goals, or you are in a deteriorating financial situation.

Whatever the reason, here are a few methods to reduce your payments and save space in your budget.

#### Get rid of PMI

Private mortgage insurance, also known as PMI, is a type of insurance policy that protects lenders against borrowers who default on their mortgage. For conventional loans, a borrower’s down payment must exceed 20% of the price of the house to avoid PMI – government-guaranteed mortgages, such as a VA or FHA loan, are exempt (if you are considering a VA loan, check out Money’s best VA lenders of the year).

Borrowers can call their lending institution to ask them to cancel the PMI after reaching 20% â€‹â€‹of their home equity. This can be achieved by making regular additional payments or lump sum payment on mortgage capital to reach that 20% sooner. You can also try to reduce the PMI by reassessing or redeveloping your home.

#### Refinancing

Refinancing your home loan is replacing an existing home loan by taking out a new one from your current lender or from another lender. This loan may have a better total interest rate and new terms that better match your financial goals.

There are two main methods of reducing your monthly refinancing payments. The first is to take advantage of lower interest rates, which can be done now, since rates are at historic lows. The second is to extend the term of the loan, thereby lengthening your payments, but at the risk of ending up with more debt for longer.

Mortgage points could be an attractive solution to potentially high mortgage payments, as they can only be “bought” before taking out a home loan. When you buy mortgage points, you are essentially paying the lender to lower your interest rate, which will lower your monthly mortgage payments over the life of the loan.

Buying Purchase Points is not the right option for everyone, but it is worth considering if you intend to hold the property for a long time.

#### Sell â€‹â€‹and buy a more affordable home

Refinancing may not be enough to reduce your monthly mortgage payment to an acceptable number. If the weight of your mortgage is just too much to bear, consider selling your home and buying a more affordable one instead.

Keep in mind that this option should be reserved for the worst case scenario where your inability to make payments could put you at risk of defaulting on your loan. You will need to invest time, money, and energy in the process of selling your current home, buying another, and then moving into your new home.

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There has never been a better time to buy a home.

To start

### Find out how much home you can afford

Understanding the limits of your budget is crucial before committing to a lending institution. This will help you stay realistic and avoid a risky purchase, even if it is your dream home, which could backfire in the future.

To find out how much home you can afford, you’ll need to enter your down payment, your condition, your credit rating, and the type of home loan you prefer.

You will also need to state either your desired monthly payment amount or your gross monthly income and monthly debts. The latter two are used to determine your debt-to-income ratio, which plays an important role in your ability to borrow in the first place.

Most lenders and calculators rate affordability with the 28/36 rule, which states that your housing expenses and total debt should not exceed 28% and 36% of your total income before tax, respectively. To calculate this, multiply your monthly income by 28 or 36, then divide it by 100.

For example, with a monthly income of \$ 4,500, you shouldn’t be spending more than \$ 1,260 on monthly housing costs. The formula to calculate this would be x = (a Ã— 28) Ã· 100, where a is your monthly income (1260 = [4,500 Ã— 28] 100).

How Much Mortgage Can I Afford?

The amount you can afford to pay for a house will depend primarily on your monthly household income, your monthly debt (credit cards, student loans), and the amount of savings available for a down payment. Your debt-to-income ratio (DTI) will also affect affordability. The higher your DTI, the more difficult it will be to get a mortgage.

What is a good down payment for a house?

A good down payment is all you can afford without breaking the bank or dipping too much into your savings. The best down payment for a home is 20%, as this lowers your monthly mortgage payments and allows you to buy a home without paying for private mortgage insurance.

How to pay off my mortgage faster

The easiest way to pay off your mortgage faster is to make larger or more frequent payments on your loan principal. For example, you could make bi-weekly payments or an additional lump sum payment per year.

You can also refinance with a shorter-term mortgage, which will increase your monthly payments in exchange for a home loan that you can pay off faster.

How to reduce my mortgage payment

Buying a cheaper home will result in lower monthly payments. Putting more money up front also reduces the amount you need to borrow. Finally, longer loan terms will reduce your monthly payment (even if you will ultimately pay more interest over 30 years than over 15).

A better rate also means a lower monthly payment, so if you’re in no rush, do what you can to boost your credit score.

How much should my deposit be?

Typically, lenders require a minimum down payment of at least 3% of the price of the home. To avoid paying private mortgage insurance premiums, which protect the lender and not the owner, borrowers typically have to pay 20%.

The average homeowner makes a down payment of between 3% and 7%.

What is the best loan term for my mortgage?

More than 90% of mortgage loans are conventional loans over 30 years. Nonetheless, you may find that a 15 year fixed rate mortgage is best for you, as you will pay less interest over the life of the loan even though you will have higher monthly payments.