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How to Use a Mortgage Calculator?

The internet has been a great source of helpful tools when it comes to big financial decisions such as mortgage payments. Mortgage calculators are a prime example of this. You’ve probably seen many of these online. You may want to use this kind of calculator to estimate your monthly payments, decide if an adjustable-rate mortgage is right for you, or determine if you can pay off your mortgage early. Here are the different things you’ll need to know to make a mortgage calculation and why they matter.

Home Price

You’ll need to plug in the final price you are paying for your home in the calculator. If you haven’t purchased a home yet—or haven’t even started looking—you can always use an estimate. You can adjust the number to find the range in price that will be right for you based on the final calculation.

Down Payment

Your down payment may be anywhere from 3% to 20% of the home’s price. If you qualify for a USDA or VA loan, you may not have to make a down payment at all. However, a down payment is usually in your best interest. If you can afford at least 20% as a down payment, you will have the added perk of avoiding private mortgage insurance.

Typically, the bigger your down payment, the lower your interest rates because the lender will not be responsible for financing as much of the house’s transaction. You should see this show up in the calculations.

Interest Rates

Your interest rate is calculated as a yearly percentage of your loan balance. So, for example, if the interest rate is 3%, you will have to pay 3% of your loan balance each year for the length of your loan. You will only be paying off interest on the portion of the loan you haven’t paid off yet.

Loan Term

Every loan is paid off over a different amount of time. The most common loan terms are 15 and 30 years. The longer the term, the lower your monthly payments will be. However, you will often end up paying more overall if you choose a longer loan term like a 30-year loan, as you’ll see when using the mortgage calculator. This is because of how the interest payments add up.


Your location plays a huge role in your mortgage payments, which is why most mortgage calculators ask for your zip code or state. This is especially important for determining your mortgage insurance payments. While the condition of the home and its age will also play a key role, the location is a more concrete thing you can add to your calculation. Your location also matters when it comes to property taxes.

Home Insurance

Although you aren’t required by law to have homeowner’s insurance, it’s definitely helpful for your peace of mind in the event of a natural disaster or a theft. Your lender will want you to have this insurance as it also protects them from a loss. Some of the factors that go into how much you’ll pay in home insurance premiums include your location, credit, and the condition of the home.