How to Use a Mortgage Payment Calculator?

If you're totally new to real estate and considering a mortgage for the first time, you might find the concept of a mortgage rather confusing. It's not, really, especially if you make use of what's called a mortgage payment calculator. This is a computer program that takes the terms of your mortgage and calculates what you payment would be for the resulting mortgage. Here are the things to know.
 

·         The mortgage amount: This is easy... it's the total amount of money you are borrowing to pay for your new property. This can be the same or (sometimes) more than the purchase price of the home, but is usually a little less because of up-front payments that are made at or before closing. These include the down payment and what is called "earnest money"... the money paid when the contract is signed, to ensure that the contract is a good-faith offer. So, let's say you're buying a house for $200,000. You might pay $10,000 in down payment and $2,000 in earnest money. That amounts to $12,000 toward the price of your house. The mortgage will pay for the rest, so you'll have to borrow $188,000.

 ·         The mortgage term: This is also easy. It's the amount of time you want to take to pay off your mortgage. The longer the term, the lower the payment... but also, the higher the total cost of the loan. If you plan to keep the property for a long time, you would do well to get as short a mortgage term as you can afford. It pays off in the long run, as can be seen when you use the mortgage payment calculator. Let's say for your purchase you decide on a 30-year loan.

 
·         The mortgage rate: Pay attention to this little number, because it will make a big difference in whether or not you can actually afford your new house. Mortgages can be found today with rates under 5%, but go up rapidly for higher-risk lenders. The mortgage rate is the third of the three pieces you'll need to run your mortgage payment calculator. Because you've got a good credit history, we'll say you can get a rate of 5.5%.

Go to any Internet search engine and enter the term "mortgage payment calculator" in the search field... hit most any of the links that come up, and you'll find a usable online tool for calculating mortgages. Plugging in $188,000 on a 30-year loan at 5.5% yields a monthly payment of $1067.44. Plug in some other numbers, and you can see how changing the terms will change your monthly installment.

But remember, you are only looking at the payment on the loan; taxes and insurance will be added on to what you pay toward the mortgage.

Have fun.