How much does that house cost? There are many ways to answer that question -- in terms of its actual price, it's performance as an investment, the way it affects its owner's lifestyle -- all of these are valid ways of evaluating the cost of property. However, when many people ask how much a home costs, they're referring to its monthly payment. This mortgage calculator is designed to provide that information.
Mortgage Payment Calculator: PITI
"Mortgage payment" carries several meanings. To a consumer, it might mean the principal and interest that is remitted to a lender each month. To an underwriter, it means the principal, interest, property taxes and homeowners insurance (or HOA dues for condominium buyers, which usually covers insurance). This calculator provides an estimate of the PITI, so the user can see how a lender will evaluate their potential house payment when approving or declining a loan application.
Mortgage Loan Calculator: Basic Inputs
To get an easy and basic payment estimate, users only need to input the home's purchase price, the expected down payment and an interest rate (real-time interest rates based on the borrowers credit, location and loan-to-value can be found on the mortgage rate calculator, LendingTree's LoanExplorer), and they'll get an estimated house payment. The chart on the right side of the screen shows how the payment was calculated -- see the example below:
The property taxes, homeowner's insurance and mortgage insurance are all calculated automatically. But what if the user knows the taxes are different, or what if he or she has a quote for home insurance? The calculator can be fine-tuned.
Tuning the Mortgage Estimator for Better Results
By clicking on the link labeled Assumptions, a user can include exact amounts for insurance, HOA dues, or property tax rates, getting a more accurate amount -- the way mortgage underwriters do when they calculate applicants' debt-to-income ratios.
One of the most important assumptions is the loan term. Consumers can see how changing the term of the loan alters its payment, and they can see what they'd need to pay if they want to retire their mortgage early. For example, if a buyer would like to take a 30-year loan to keep the required monthly payment low, but really wants to pay the loan off in 20 years, he or she could enter 20 years in the term field -- that's the payment that would retire the mortgage in 20 years.
Checking the box labeled "Include Private Mortgage Insurance" causes the calculator to include a monthly amount if the down payment or home equity is less than 20 percent. Users should leave this unchecked if they, the lender or the seller are buying single premium coverage by paying a lump sum. Users can also play with different down payment amounts, seeing how they impact the cost of mortgage insurance. This amount is an estimate, however. In addition to the loan-to-value, mortgage insurers base their premiums on the applicant's credit rating, the property use and type-- and those parameters are not part of this calculator's inputs.
Mortgage Calculator Limitations
Mortgage calculators only return answers that are as good as the data they're "fed." That means they won't reflect parameters that are unknown to the users. For example, if a property has a special assessment, the cost won't be reflected in a calculator. If the loan is adjustable and has a rate that can change over time, the adjusted payments won't show up. If the borrower's inputting mortgage rates that are unavailable to applicants with his or her credit rating, the results won't be very helpful.
For this reason, it's best to use more than one tool. LoanExplorer, for example, lets a home buyer put in a location, down payment, credit rating, VA eligibility and other factors and it delivers a more accurate mortgage rate and payment -- with a breakdown of the loan costs and a monthly payment. Using that rate in this mortgage payment calculator delivers a more accurate result -- a "real" rate and payment with the addition of estimated taxes, insurance and mortgage insurance (if applicable).