When looking to borrow money, it’s important to use a mortgage loan calculator or home loan calculator and understand key points about loans before reaching out to any lender, including a bank, credit union or other institution.
*Please note that we do not offer loans. This calculator is for education purposes and to illustrate how loans work.*
When looking to borrow money, it’s important to use a mortgage loan calculator or home loan calculator and understand key points about loans before reaching out to any lender, including a bank, credit union or other institution. This guide offers a custom mortgage loan calculator (above), in addition to 9 key points we want you to keep in mind in order to make a good decision for you and your financial health.
The Custom Mortgage Loan Calculator Explained
Mortgage and home loan payments are a function of the amount you borrow, the interest rate and the number of payments you will make. To make the calculation more accurate for an all-in monthly figure, please fill in the number of points purchased, property taxes (and HOA dues), insurance and mortgage insurance (PMI). If you aren’t sure what you can afford and would like to get in touch with us for a detailed and thorough evaluation of your financial health, please visit our Wealth Management page.
Calculator’s Key Inputs
Working from the top of the mortgage loan calculator, there are 9 factors that can be filled in:
1. Price of Real Estate / Price of Home (required)
This is the purchase price of your property.
2. Down Payment Percentage (required)
3. Loan Amount (calculated, optional)
This is a function of #1 and #2, but can be adjusted higher if you do not plan to pay fees, transfer taxes and other mortgage-related items out of pocket.
4. Number of Payments
The loan term is the length of the loan contract in months. Most loans are 30 years, but other contract lengths exist. In many situations, a shorter loan will have a lower interest rate, in addition to the earlier payoff date.
5. Annual Interest Rate (required)
Your interest rate is determined by:
- Your credit score
- Current market rates
- Loan term length
- Your personal financial situation
6. Points (optional)
Mortgage points “lower” the rate by prepaying interest. Sometimes this is called “buying down the interest rate” or a “buydown”.
7. Annual Property Taxes (optional)
Adding an estimate for property taxes, HOA fees or other recurring items will improve the precision of your monthly payment estimate.
8. Annual Insurance (optional)
Adding an estimate for homeowners insurance (including earthquake and other specific peril insurance) will improve the precision of your monthly payment estimate.
9. Private Mortgage Insurance (PMI) (optional)
This is usually applied when less than 20% is put down. The function of this insurance is to protect the lender.
Custom Mortgage Loan Calculator Outputs
1. Monthly Payment Amount
This is the amount you’ll owe the bank each month for the duration of your loan. In most situations, it will not fluctuate, though some loans like HELOCs (home equity line of credit) and ARMs (adjustable rate mortgages) have rates that move around.
2. Down Payment Amount
This is a copy from above and functions as a reminder about how much cash you’re expecting to contribute.
3. Total Interest
This is the amount of money you’ll have paid to borrow the money over the course of your loan.
3. Total Principal and Interest
This is the total amount of money you’ll have paid to buy the car. In the base case plugged into the custom loan calculator by default, a $500,000 loan for 360 months (30 years) years at 6.0% will result in a payment of $2,528 per month. Total interest will be $510,000, resulting in a total outlay of $910,000.
9 Loan Tips to Keep in Mind:
- Interest Rate Field: In this calculator, we expect the interest rate to remain static. In some situations (usually called Adjustable Rate Mortgages or ARMs), interest rates can move.
- Loan Term Options: Common mortgage term lengths are 10, 15, 30 years, though other lengths exist.
- Payment /Amortization Schedule: Click this button on the bottom of the calculator to show how payments are applied to interest versus principal over the life of the loan.
- Total Interest Paid: This is the total interest cost over the full loan term.
- Property Tax Estimation: Your local tax agency often provides historical property tax records on their website (or in person). This may help you understand what your property tax bill might be.
- Homeowners Insurance: Estimated insurance costs help offer a complete monthly payment amount.
- PMI: Private mortgage insurance calculations are helpful for loans with less than 20% down payment.
- Affordability Analysis: The goal of this calculator is to help users determine how much house they can afford based on their income and expenses.
Understanding how car loan payments are calculated empowers you to negotiate better terms and avoid financial surprises. Before signing any mortgage or home loan agreement, always calculate your monthly payment and ensure it fits comfortably within your budget.
Can we help you with our Custom Loan Calculator?
For more than 47 years, we have collaborated with our clients in their investment decision making process as they pursue their long-term financial goals.
We are committed to keeping your goals, concerns and attitude about investing at the heart of your plan.
If you’re considering a large purchase, but want additional guidance and ready to experience our personalized investment approach and exceptional client service, contact Jason R. Clark, CFA at 949.424.1013 or jclark@kovitz.com.
