To use a mortgage calculator, you can follow these 6 steps:
- Enter your home price in the Home price field.
- Input your down payment in the Down payment field, either as a dollar amount or percentage.
- Enter your loan term in the Loan term field, usually 30 years, but could be 20, 15, or 10.
- Input your interest rate in the Interest rate field, which defaults to the current average rate, but you can adjust this percentage.
- Enter your ZIP code in the ZIP code field.
- Click Update to calculate your mortgage payments.
The major part of your mortgage payment includes the principal and the interest. The principal is the amount you borrowed, while the interest is the sum you pay the lender for borrowing it. Your lender also might collect an extra amount every month to put into escrow, money that the lender (or servicer) then typically pays directly to the local property tax collector and to your insurance carrier.
You can also use a mortgage calculator to input extra payments, which can help you decide whether to prepay your mortgage and by how much.
Typical costs included in a mortgage payment are:
- Principal: The amount you borrowed from the lender.
- Interest: The sum you pay the lender for borrowing it.
- Property taxes: Local authorities assess an annual tax on your property.
- Homeowners insurance: Your insurance policy can cover damage and financial losses from fire, storms, theft, a tree falling on your home and other hazards.
- Mortgage insurance: If you’re getting a conventional or FHA loan and your down payment is less than 20 percent of the home's purchase price, you'll pay mortgage insurance premiums.
You can also use a mortgage calculator to help determine your budget and crunch the numbers to see how much house you can afford.
Other costs to consider when purchasing a home include closing costs, which are one-time fees imposed by the lender for originating and underwriting your mortgage or by your municipality for recording your purchase. These expenses run 2 to 5 percent of the total loan amount and comprise the total cost of your loan.
You can use a mortgage calculator to estimate your mortgage payments and consider these costs when purchasing a home.
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