Calculating your mortgage payment based on your interest rate isn’t as complicated as you might think. There are many calculation tools available to help you accurately determine what your payment will be, based on different interest rates. The interest rate isn’t the only thing that determines your mortgage payment amount, however. You also need to consider insurance, taxes, your loan type, loan balance, etc.
Mortgage Payment Calculators
There are several reliable calculators available online for free that can help you determine how much money you will be paying each month based off your interest rate and loan terms. Instead of just guessing at which interest rate for which you might qualify, start with a reasonable rate, perhaps one your bank has given you or you have found advertised on the lender’s website. Then plug in the main numbers you can easily research that will affect your mortgage payment amount, including:
• Total loan amount
• Length of loan term (commonly 15 or 30 years)
• Interest rate
These three basic numbers will be your starting point for calculating your monthly mortgage payment. Some calculators will ask for things like your average credit rating, which allows the calculator to adjust the interest rate accordingly. You can request a mortgage payment calculation, or try any of these online. We have mortgage calculators here on our blog you can use at no costs.
Don’t forget that you will need to verify with your lender how much you will need for insurance – some lenders require an arrangement for escrow with this – where the insurance amount is added on to the monthly payment. This is commonly related to Federal Housing Administration (FHA) loans and is known as PMI, or Private Mortgage Insurance. This protects the lender in the event that you default on your loan.
FHA loans are generally for those who do not qualify for a conventional mortgage, whether it be because they did not meet the credit requirements or did not have a 20% down payment. Some first-time homeowners are also required to carry PMI because they don’t have established credit records when it comes to large loan amounts.
Calculating the Mortgage Payment Amounts
Even though most people think of a mortgage as a 30 year fixed-rate loan, where the interest rate stays the same for the life of the loan and payments are spread out over 30 years, there are other options you need to consider when calculating possible mortgage payment amounts.
Keep in mind that there are interest only mortgages in which you will only be paying on interest for a number of years until principle is added to the monthly payments. There are also adjustable-rate mortgages (ARM) which can adjust many times throughout the course of the loan and this can cause the monthly payments to fluctuate a significant amount.
While simple calculation tools for monthly mortgage payments can give you an estimate on what you might expect, don’t forget to allow for additional expenses that are components to almost every mortgage. Once you have an idea of the interest rate you will receive from your bank, you can use that to calculate your monthly payments and this will give you a good estimate of the final payment you will be offered.
My name is Maurice “Moe” Bedard. I am the founder of America’s #1 Mortgage Forum, LoanSafe.org. My online work has been featured in the New York Times, LA Times, Fox Business, and many other media publications.