It’s fun to spend hours searching for your home online, but it’s also important to take some time to pre-empt what your mortgage payments will be.
A mortgage payment calculator can be a great tool to help you understand not only what you can afford, but also the payment associated with the various houses (and price points) you’re looking at.
But, not all mortgage payment calculators are created equal!
Read on to find out more about what you should look for in a mortgage payment calculator.
Mortgage Payment Calculator Feature 1: Factors in Hidden Costs
There are a number of hidden costs associated with home ownership that can quickly add up. The right mortgage payment calculator will be able to handle more than the basic information, like the cost of the house, length of the loan, interest rate, and down payment.
Look for a calculator that also factors in other details that are often overlooked, such as the property tax rate, home insurance, and HOA fees.
While these fees and costs may seem small in comparison to the purchase price of a home, they play an important role in determining your overall budget.
As a home buyer, it’s crucial to understand that costs will vary between properties, so make sure you’re taking all expenses into account when you’re shopping. The right mortgage calculator will help you make an informed decision.
Mortgage Payment Calculator Feature 2: Allows You to Work Backward
While many home buyers begin their calculations with the property price or their annual income, it’s better to find a mortgage payment calculator that allows the user to manually input a monthly payment that comfortably fits within their budget.
From there, the calculator can help you to work backward to determine other important costs, such as a home price that you can afford, or the amount that you should put toward a down payment.
You can adjust individual factors, like interest rate or HOA fees, and see how this affects the price you can realistically afford to pay for a home.
Mortgage Payment Calculator Feature 3: Shows the Effects of Lower Debt Payments
Most of the time, home buyers are using a payment calculator to help them determine their monthly mortgage payment. However, an advanced mortgage calculator can also tell you how much home you can afford based on simple inputs, including your annual income and regular monthly expenses.
Lenders can look at your debt to income ratio, or DTI, which is the overall percentage of your income that has to go toward paying your debt. Lenders are normally looking for a cap on your DTI of around 35 to 40%, so that they feel more confident lending the money and that the borrower won’t get in over their head.
You can use a mortgage payment calculator to see the effects of lowering your monthly debts on home affordability. The lower your monthly payments and expenses are, the more home you can afford.
Mortgage Payment Calculator Feature 4: Offers the Ability to Break Out Your Monthly Payments
As a consumer, you want to know exactly where your money is going each month—and this is true with your mortgage payment, as well. In addition to your payments toward the principal, there are other expenses, such as mortgage interest and insurance.
Look for a mortgage payment calculator that can help break down where your payment is going each month. Simply include the applicable information, like the house price, interest rate, down payment, and length of the loan, and you can see what your monthly payment is, along with a detailed breakout of the other costs. You can also enter additional expenses to see how they impact your monthly payment amount.
Mortgage Payment Calculator Feature 5: Gives the Ability to Check the Progress of Your Payoff
While it is helpful to see the breakout of your monthly payment, it is also beneficial to see the progress toward paying off your principal loan.
It gives you a clear picture of how you are building equity, which can help you make informed decisions about selling or refinancing your home.
How to Find the Right Mortgage for You
Wondering about how much house you can afford or interested in exploring homes available for sale in your area? Don’t forget to check out our mortgage payment calculator to help you make an informed decision. And when you’re ready to make a move, our handy homebuyer checklist will help you get started.
