What You Should Know About Mortgage Calculators

While useful, online tools may not be telling the whole story

Anyone who has looked for mortgage information online has surely encountered a loan calculator—maybe even several. They are literally hundreds online. But how useful are these tools, really?

Mortgage calculators exist to help borrowers determine how much their monthly payment will be under a particular loan scenario. If you know how much money you need to borrow and the interest rate you want, a mortgage calculator can help determine how much of a monthly payment you can expect to make.

For this reason, mortgage calculators are a great tool if you’re just beginning your homeownership journey. When using a mortgage calculator, however, you should know that often the monthly payment that the calculator gives you is not going to be what you’ll actually pay. Here are several reasons why:

1)    Most mortgage calculators calculate your monthly payment based on the loan principal and interest rate only. Principal and interest will comprise the bulk of your mortgage payment, but your payment will include other costs as well.

2)    Part of your mortgage payment may go toward paying property taxes, which could add hundreds of dollars to your monthly payment. These taxes can vary widely based on where you live, the assessed value of your home, and any local bonds and utility taxes assessed by your city or county. Most mortgage calculators do not include these expenses.

3)    Mortgage insurance is another cost that is not typically factored into most calculators. If you plan on making a down payment on your mortgage of less than 20 percent of the total purchase price, you may need to pay mortgage insurance, which will increase your payment.

4)    Additional costs included in your mortgage payment include homeowner’s insurance and flood insurance.

5)    If you’re buying a condo or a property in a planned community, you’ll also have to budget for monthly association dues, which could be substantial. While these costs don’t typically get added to your mortgage payment, they are important to keep in mind when determining if you can afford the home you are considering.

6)    Another factor that will affect your mortgage payment is your interest rate. Keep in mind that the interest rate you see on a mortgage calculator may not accurately reflect the rate you’ll get. The actual rate will depend on your credit profile, your ability to repay the loan and how much money you’re using as a down payment. You won’t know the rate you qualify for until after you apply for a loan.

Does this mean that mortgage calculators aren’t helpful? Not at all. You just need to know how to use them and understand what may be missing. They are very useful for providing a rough idea of what you can expect your monthly payment will be and helping you determine the home and loan you can afford. Our mortgage calculator, which you can find here, is a great place to start.

To be absolutely sure what you should expect to pay for a mortgage, we highly recommend contacting a mortgage expert at Right By You Mortgage. We can help you understand what rates you will qualify for and what your taxes and insurance payments will likely be.

If you’re ready to speak to one of our experienced loan experts, give us a call at 877-552-2242 or reach out to us by email today.