How Do You Calculate the Amount of Mortgage Payments?

How Do You Calculate the Amount of Mortgage Payments?

So you’ve been shopping for a home and you have found several that meet your criteria but they have a range of prices. How do you determine if you can afford the ones on the higher end of your price range? Here are the main factors that determine your monthly mortgage payments.

When shopping for a home, the most important factor in your decision making process is likely going to be the price. Can you afford the monthly payments? Is the home worth the value at which it is priced? How do you know how much the monthly payments are going to be? Here is how you can calculate how much you will need to pay each month to help you make your decision.

1. Use the help of a mortgage calculator. There are many websites that offer mortgage calculators that will help you calculate your monthly interest and principal payments based on the cost of the mortgage, the length of the mortgage term and your mortgage rates.

2. Don’t forget about the property taxes. Your property taxes can increase the amount you pay on your mortgage significantly depending on where you live and some other factors. You can usually have your property taxes rolled into your mortgage payments, too. Find out how much your annual property taxes will cost and then divide that by the number of payments you will make each year. Add that number to your monthly mortgage payment.

3. Mortgage insurance is vital. There are two types of insurance you will need to think about. A homeowner’s insurance policy is essential to help you protect your financial interest in the home in case a catastrophe happens. But if you don’t have a 20 percent down payment for the home, your lender will likely require you to have PMI, or private mortgage insurance, to protect their financial interest in the home. Determine the price of the insurance you will need to carry for your home and divide that by the number of mortgage payments, too. You can typically roll these charges into your mortgage payments as well to help you keep everything simple.

4. Add the figures from all of these steps together. This will give you a pretty good idea of how much you will need each month to pay your mortgage.

Before you make the decision about if you can afford this mortgage payment, remember that lenders will not make the home loan if the figure is more than 30 percent of your income. You also have to take into consideration the utility and maintenance costs. Large homes are going to be expensive to heat and cool throughout the year and those bills can range into the hundreds of dollars. Although it is exciting to buy a new home, make sure you take the time to do your homework on the costs before you make your final decision.

Click here to compare mortgage rates in your area.

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  • arkwebsites

    April 10, 2011

    Excellent post about the merits of using a mortgage calculator and what they can be used for.
    I run a site with a completely free mortgage calculator which I would be happy to share the code with you for as long as my site link remains in the calculator. Check out my main calculator on my homepage and the mini calculator on my sidebar.

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