Mortgage Advice & Articles

Mortgage calculators do the math in a snap

August 06, 2007

Online mortgage calculators make it faster and easier than ever to compare loan products and figure out how much you can afford to borrow.

In fact, mortgage calculators can help you get answers to many of your loan-related questions – whether you’re shopping for a home loan, car loan, or any other type of loan. For example, they can help you to:

Calculate your loan payments
A loan payment calculator can help you determine how much your monthly payments will be for any type of loan, including a mortgage, car loan, or personal loan.

Perhaps you’re in the market for a new car. You’d like to borrow $24,000 and pay off the loan in five years. The best rate you’ve found is 7.2 percent. How much would that cost each month? Simply enter the numbers into a loan payment calculator:

Loan amount: $24,000
Interest rate: 7.2%
Term: 5 years

Next, click the “Calculate” button and instantly you’ll see your monthly payment would be $477.50.

A bit more than you can afford? One option might be to take an extra couple of years to pay off the car. Simply change the term from five to seven years, hit “Recalculate”, and you’ll see your new payment amount would be $364.58. Plus, you can view your payment amortization table and find out exactly how much you are paying in interest.

Determine what price home you can afford
The LendingTree home affordability calculator is a great tool to use when you’re looking for a new home. Your first step when buying a home is determining how much you can comfortably afford to spend. The home affordability calculator makes this easy. Just enter your (or your and your partner’s combined) monthly income, the amount you’ve saved for a down payment, and the monthly payments on your other debts (including credit cards or other loans). When calculating your monthly debt payments, be sure to add together all your monthly loan payments including the minimum monthly payment on any credit cards you have (not what you actually pay to these credit cards each month).

To get a better idea of what you can truly afford, input your estimated property taxes and insurance costs. Your real estate agent should be able to help you estimate these costs for the neighborhood you’re interested in. Finally, enter the going interest rate for mortgages and your preferred term.

For example:

Monthly income:  $5,650      
Down payment:  $20,000 
Monthly debt payments:  $364.58  
Insurance (annual):  $500 
Property taxes (annual):  $2,200 
Mortgage interest rate:   6%
Term:  30 years

Hit “Calculate” and you’ll see:

Mortgage loan amount:  $240,917.14
Price of home you can afford:  $260,917.14
Monthly mortgage payment:   $1,444.42

Armed with this information, you can shop around to get pre-approved on a mortgage of $240,000.

Compare loan options
Shopping for a mortgage means comparing more than just interest rates. You also have to weigh the benefits of different types of loans.

For example, let’s say that two lenders offer you that $240,000 mortgage -- one with a fixed rate of 6.5 percent, and another with an adjustable rate starting at 6 percent and changing every year. The lower rate on the ARM may seem like the better deal but what if rates were to go up by, say, 0.75 percent next year? And what if the upfront costs on the fixed-rate mortgage are $700 lower? If you’re confused about which to choose, simply enter the information in a loan comparison calculator. Assuming you plan to hold onto the loan for 10 years:

                                                   Loan 1 (fixed)    Loan 2 (ARM)    
 Interest Rate:  6.5%  6.0%
 Term:  30 years  30 years
 Upfront costs:  $3,500  $4,200
 Months at initial rate:    12
 Index:    3.5%
 Margin:    2.5%
 Expected change in  rate:    .75%
 Lifetime interest rate cap:    12%

Click “Calculate” and get the following results:

   Loan 1 (fixed)  Loan 2 (ARM)
Monthly payment: $1,516.96 $1,438.92
Maximum monthly payment: $1,516.96 $2,469.00
Total cost for 10 years $189,036 $189,308

The calculator reveals that the two loans are quite comparable -- despite the higher upfront fees, the ARM provides a lower monthly payment initially. The total cost for both loans is almost identical over 10 years, provided that the interest rate on the ARM remains constant after the first increase.

However, if you plug in the lifetime interest rate cap on the adjustable rate mortgage, you’ll see how high your monthly payments could potentially be. In this example the monthly payments on loan 2 could rise to $2,469. The lifetime cap on an ARM is often expressed as an increment of the initial loan rate. Therefore, the lifetime cap in the above example is calculated by adding a 6% lifetime cap to the 6% initial interest rate.

* No calculator can predict whether rates will rise or drop. Only you can decide whether you’d be more comfortable with the long-term security of a fixed-rate loan.

Find out if you can save by refinancing
Got a mortgage and wonder whether you’d be better off to refinance? Simply use a refinancing calculator. It will also tell you how long it will take for you to recoup the upfront fees involved.

LendingTree offers numerous similar online tools, such as:

Cash-out refinancing vs. home equity loan calculator
Rent or buy calculator
Mortgage discount points calculator
Adjustable rate mortgage payment calculator
Loan consolidation calculator
Home equity calculator
Home equity line of credit calculator  

Get Home Mortgage Loan offers customized for you today.