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A mortgage is often a necessary part of buying a home, but it can be difficult to understand what you’re paying for—and what you can actually afford. A mortgage calculator can help borrowers estimate their monthly mortgage payments based on the purchase price, down payment, interest rate and other monthly homeowner expenses.
Whether you’re shopping around for a mortgage or want to build an amortization table for your current loan, a mortgage calculator can offer insights into your monthly payments. Follow these steps to use the Forbes Advisor mortgage calculator:
1. Enter the home price and down payment amount. Start by adding the total purchase price for the home you’re seeking to buy on the left side of the screen. If you don’t have a specific house in mind, you can experiment with this number to see how much house you can afford. Likewise, if you’re considering making an offer on a home, this calculator can help you determine how much you can afford to offer. Then, add the down payment you expect to make as either a percentage of the purchase price or as a specific amount.
2. Enter your interest rate. If you’ve already shopped around for a loan and have been offered a range of interest rates, enter one of those values into the interest rate box on the left. If you haven’t prequalified for an interest rate yet, you can enter the current average mortgage rate as a starting point.
3. Choose a loan term. To help calculate your monthly mortgage payment, enter a loan term up to a maximum of 30 years. Keep in mind that if you haven’t already been approved for a loan term and interest rate, the rate you select here should correspond with the average rate you entered above. For example, if you choose a 15-year term, also use the average rate for 15-year mortgages. If, instead, you’re trying to strike a balance between low monthly payments and a shorter term, you can use this portion of the calculator to compare your options.
4. Add in taxes, insurance and HOA fees. This portion of the calculator is optional, but it can help give you a more accurate picture of your potential monthly payments. If you have the information available, plug in your monthly property tax, private mortgage insurance (PMI), homeowners insurance and homeowners association (HOA) fees. If you don’t have these numbers in front of you, some information may be available through your real estate agent or your local property assessor’s website.
5. Review your loan details. Once you enter all of the relevant information on the left side of the screen, the calculator will auto-populate your payment breakdown on the right. This portion of the calculator lets you view your monthly payments as well as your estimated payoff month. Navigate to the amortization schedule tab to view how much of your annual payments will go toward interest and principal. You can also toggle between the annual and monthly view to see a breakdown of each monthly payment.
If this is your first time shopping for a mortgage, the terminology can be intimidating. It also can be difficult to understand what you’re paying for—and why. Here’s what to look for when reviewing your mortgage costs:
How much house you can afford depends on several factors, including your monthly income, existing debt service and how much you have saved for a down payment. When determining whether to approve you for a certain mortgage amount, lenders pay close attention to your debt-to-income ratio (DTI), which is a comparison of your total monthly debt payment to your monthly pre-tax income. In general, your monthly housing costs shouldn’t be more than about 28% of your income, though you may be approved with a higher percentage.
Keep in mind, however, that just because you can afford a house on paper doesn’t mean your budget can actually handle the new payments. Beyond the factors your bank considers when pre-approving you for a mortgage amount, consider how much money you’ll have on-hand after you make the down payment. It’s best to have at least three months of payments in savings in case you experience financial hardship. Also calculate how much you expect to pay in maintenance and other house-related expenses each month.
Likewise, when determining how much house you can afford, consider your other financial goals. For example, if you’re planning to retire early, determine how much money you need to save or invest each month and then calculate how much you’ll have leftover to dedicate to a mortgage payment. Ultimately, the house you can afford depends on what you’re comfortable with—just because a bank pre-approves you for a mortgage doesn’t mean you should maximize your borrowing power.
A mortgage term is the length of time you have to pay off your mortgage—stated another way, it’s the time span over which a mortgage is amortized. The most common mortgage terms are 15 and 30 years, though other terms also exist and may even range up to 40 years. The length of your mortgage terms dictates (in part) how much you’ll pay each month—the longer your term, the lower your monthly payment.
That said, interest rates are usually lower for 15-year mortgages than for 30-year terms, and you’ll pay more in interest over the life of a 30-year loan. To determine which mortgage term is right for you, consider how much you can afford to pay each month and how quickly you prefer to have your mortgage paid off.
If you can afford to pay more each month but still don’t know which term to choose, it’s also worth considering whether you’d be able to break even—or, perhaps, save—on the interest by choosing a lower monthly payment and investing the difference.
Forbes Advisor’s mortgage calculator makes it easy to estimate your monthly mortgage payment using your home price, down payment and other loan details. Based on that information, it also calculates how much of each monthly payment will go toward interest and how much will cover the loan principal. You can also view how much you’ll pay in principal and interest each year of your mortgage term.
To make these calculations, our tool uses this data:
A mortgage is a secured loan that is collateralized by the home it is financing. This means that the lender will have a lien on your home until the mortgage is paid in full. After closing, you’ll make monthly payments—which covers principal, interest, taxes and insurance. If you default on the mortgage, the bank will have the ability to foreclose on the property.
In addition to there being multiple mortgage terms, there are several common types of mortgages. These include conventional loans and jumbo mortgages, which are issued by private lenders but have more stringent qualifications because they exceed the maximum loans amounts established by the Federal Housing Finance Administration (FHFA).
Prospective homebuyers also can access mortgages insured by the federal government, including Federal Housing Administration (FHA), U.S. Department of Agriculture (USDA), U.S. Department of Veterans Affairs (VA) and 203(k) loans. Minimum qualifications for these mortgages vary, but they are all intended for low- to mid-income buyers as well as first-time buyers.
Mortgages are available through traditional banks and credit unions as well as a number of online lenders. To apply for a mortgage, start by reviewing your credit profile and improving your credit score so you’ll qualify for a lower interest rate. Then, calculate how much home you can afford, including how much of a down payment you can make. When you’re ready to apply, compile necessary documentation like income verification and proof of assets and start shopping for the best rates.
